MEMBERS' HANDBOOK PART IV DIRECTIVES AND IMPORTANT … · 2020. 7. 21. · members' handbook directives and important decisions contents directive no. particular 1. students’ training,

MEMBERS' HANDBOOK

PART IV

DIRECTIVES AND IMPORTANT DECISIONS OFTHE COUNCIL AND ITS COMMITTEES

THE INSTITUTE OFCHARTERED ACCOUNTANTS OF PAKISTAN

MEMBERS' HANDBOOK

DIRECTIVES AND IMPORTANT DECISIONS

CONTENTS

Directive No.

Particular

1. STUDENTS’ TRAINING, EDUCATION AND EXAMINATION 2. FOREIGN QUALIFICATIONS AND TRAINING 3. FEES AND SUBSCRIPTIONS 4. PRACTICES ADMINISTRATION AS CHARTERED ACCOUNTANTS 5. PRACTICE ADMINISTRATION AS MANAGEMENT CONSULTANTS

6. ETHICS 7. MEMBERS' CONDUCT-GENERALLY 8. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)

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MEMBERS' HANDBOOK

PART IV

1. STUDENTS’ TRAINING EDUCATIONAND EXAMINATIONS


SECTIONAL INDEX

1. STUDENT’S TRAINING, EDUCATION AND EXAMINATIONS

CONTENTS

1.01 Education and Training Regulations-2013

1.02 Registered Accounting Education Tutors Scheme-2014

1.03 Training Regulations and Guidelines:

Training in Practice 2015 Training Outside Practice 2016

1.04 Specified Degree Awarding Institutes (SDAI) and Relevant Degree Awarding Institutes (RDAI)

1.05 Instructions to Principals - Terms and Conditions for Trainee Students (Withdrawn)

1.06 Students prohibited from using description like C.A. (Inter),

C. A. (CC), CA (Groups I & II) or any other description (Withdrawn)

1.07 Referral concession – appearance in all papers necessary

(Withdrawn)

1.08 Minimum period of training to be served vis-à-vis appearance at Intermediate Examination

1.09 Condition of enrolling trainee without passing Entrance Exanimation deferred (Withdrawn)

1.10 Acceptance of application for admission to examinations with late fee (Withdrawn)

1.11 Refund of Examination Fee (Withdrawn)

1.12 Council member's attendance at meeting considering Examination results involving close relatives (Withdrawn)

1.13 Procedure on Termination of Students’ Training Contract (Bye-Law 107 (1) of CA Bye-Laws 1983) (Withdrawn)

1.14 Notification on exemption to candidates who have passed Examinations of ACCA, CIMA and ICMAP (Withdrawn)

SECTIONAL INDEX

1. STUDENT’S TRAINING, EDUCATION AND EXAMINATIONS

CONTENTS

1.15 Notification Regarding Directive 1.15 of the Council (Exemption From Pre-Entry Proficiency Test)

1.16 Period of training (Withdrawn)

1.17 Minimum stipend rates (Withdrawn)

1.18 Exemptions available to graduates of specified Degree awarding institutes (SDAIS) (Withdrawn)

1.19 Declaration of Specified Degree Awarding Institute (SDAI)

EDUCATION AND TRAINING SCHEME 2013

Directive 1.01

EDUCATION & TRAINING SCHEME 2013 1

TABLE OF CONTENTS

Paragraph Description Page No.

1 Short title and commencement 2

2 Definitions 2

3 Registration 2

4 Curriculum and syllabus 3

5 Exemption from examinations 5

6 Fee and refunds 7

7 Examinations 8

8 Use of designation 10

9 Prohibition for use of certain designation 11

10 Rules of progression 11

11 Transition policy 12

12 Education delivery system 14

13 Training regulations and guidelines 14

14 Relevant degree awarding institute (RDAI) and

Specified degree awarding institute (SDAI)

14

15 Removal of difficulty 14

Annexure-A Syllabus 15

Directive 1.01


THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN EDUCATION AND TRAINING SCHEME 2013

In exercise of the powers conferred by section 15 of the Chartered Accountants Ordinance, 1961 read with bye- law 129A of Chartered Accountants Bye-Laws, 1983, to regulate the education and training of the Institute, the Council approves the following scheme:-

1. SHORT TITLE AND COMMENCEMENT

(1) This scheme shall be known as Education and Training Scheme 2013.

(2) This Scheme shall become effective from March 15, 2014 subject to the transitional arrangements specified in this Scheme.

2. DEFINITIONS

(1) In this Scheme, unless there is anything repugnant in the subject context:

(i) AFC means Assessment of Fundamental Competencies;

(ii) CAF means Certificate in Accounting and Finance;

(iii) Chairman means the Chairman of ETCOM;

(iv) CFAP means Certified Finance and Accounting Professional;

(v) Directive means directive issued by the Council or its standing committees under bye-law 129A;

(vi) ETCOM means the Education and Training Committee;

(vii) Examinee means a person admitted to the examinations of the Institute;

(viii) Fulltime student means a person enrolled for appearing in examinations of the Institute under the Ordinance or the Bye-Laws made thereunder, and who has not yet started the training prescribed under the bye-laws;

(ix) Institute means The Institute of Chartered Accountants of Pakistan;

(x) Member means a member of the Institute;

(xi) MSA means Multi Subject Assessment;

(xii) Permitted book means the books an examinee may carry while attempting the examinations;

(xiii)* Relevant Degree Awarding Institutes (RDAI) means a degree awarding university or institute recognized by Higher Education Commission of Pakistan, which fulfills the criteria specified by the Council.

(xiv) Trainee student means a person who has entered into a contract of training prescribed under the bye-laws, and has been registered as such by the Institute; and

(xv) Website means website of the Institute www.icap.org.pk.

(2) Unless the context otherwise requires, all other terms and expressions used but not defined in this Scheme shall have the same meaning as assigned to them in the Ordinance and Bye-Laws; and words importing the singular shall include the plural and vice versa.

3. REGISTRATION (1) Registration as fulltime student

Persons shall be registered as full time students if they:

(i) are graduates from a local or foreign university recognized by competent authority of higher education in Pakistan and have undertaken:

(a) minimum 16 years of education; or

(b) minimum 14 years of education with 45% aggregate marks or equivalent grades; or

(ii) have passed Higher Secondary School Certificate with minimum 50% aggregate marks ; or two subjects at A Levels; or any other equivalent qualification recognized by the Council with minimum aggregate marks or grades as may be specified by the Council;

(iii) have applied to the Institute for registration; and

(iv) have paid the specified registration fee.

*264th meeting of the Council held on May 8 and 9, 2015.

Directive 1.01

http://www.icap.org.pk/


(2) Registration as trainee student

Persons shall be registered as trainee students if they:

(i) have successfully completed the following qualification:

(a) CAF stage or obtained exemption from CAF stage or equivalent examinations of the Institute; or

(b) A degree comprising minimum of 14 years of education with minimum 45% marks in aggregate or equivalent grades in any discipline from any local or foreign degree awarding institute recognized by competent authority of higher education in Pakistan;

(ii) have attained 16 years of age;

(iii) have completed Presentation and Communication Skills Course specified at CAF stage as required under paragraph 4(7);

(iv) have been offered a training contract by an approved training organization and have applied to the Institute for registration; and

(v) have paid the specified registration fee.

(3) Provisional registration

A person may be provisionally registered in the following circumstances:

(i) As fulltime student where result of pre-requisite qualification is awaited. Provided that the provisional registration shall stand cancelled if the person fails to pass required examinations or obtain minimum marks or grades required to be eligible for registration by the last date of submission of form for the first due examination with specified late fee;

(ii) As trainee student where certificate or degree of pre-requisite qualification is awaited in normal course; or

(iii) Any other circumstances deemed appropriate by the Council for any category.

4. CURRICULUM AND SYLLABUS

(1) Any person seeking membership of the Institute under sub-section (1)(ii) of section 4 of the Ordinance shall be required to pass all the subjects forming part of the curriculum or obtain exemption therefrom.

(2) Curriculum

The examinations of the Institute shall consist of the following stages and subjects:

(i) Assessment of Fundamental Competencies (AFC)

AFC-1 Functional English

AFC-2 Business Communication

AFC-3 Quantitative Methods

AFC-4 Introduction to Information Technology

(ii) Certificate in Accounting and Finance (CAF)

Knowledge

CAF-1 Introduction to Accounting

CAF-2 Introduction to Economics and Finance

CAF-3 Business Law

CAF-4 Business Management & Behavioural Studies

Application

CAF-5 Financial Accounting and Reporting – I

CAF-6 Principles of Taxation

CAF-7 Financial Accounting and Reporting – II

CAF-8 Cost and Management Accounting

CAF-9 Audit and Assurance

*Gateway Examinations

GWE 1 Accounting and Reporting (60%) Management Accounting (40%)

GWE 2 Audit and Assurance (50%) Taxation (50%)

*260th meeting of the Council held on January 8, 2015.

Directive 1.01


(iii) Certified Finance and Accounting Professional (CFAP)

CFAP-1 Advanced Accounting and Financial Reporting

CFAP -2 Corporate Laws

CFAP -3 Business Management and Strategy

CFAP -4 Business Finance Decisions

CFAP -5 Advanced Taxation

CFAP -6 Audit, Assurance and Related Services

(iv)* Multi Subject Assessment (MSA)

MSA-1 Financial Reporting and Assurance Professional Competence MSA-2 Management Professional Competence

(3) The curriculum shall be implemented in accordance with the transition policy specified in this Scheme.

(4) Syllabus

(i) The contents and learning outcomes of each subject are attached as Annexure –A.

(ii) Where specific reference to any legislation, guideline, standard and other similar document is given in the syllabus, it shall be deemed to cover any subsequent amendments that may be made therein from time to time, subject to the timelines mentioned in paragraph 7(2A).

(5) Changes in syllabus

Corrections of editorial nature and changes in syllabus to reflect changes in any legislation, guideline, standard and other similar document or changes to add, delete or amend any topic not changing the syllabus of any subject significantly and changes in learning outcomes of individual topic of the syllabus shall be made by ETCOM with the consultation of Examination Committee.

(6) Revision of curriculum and syllabus

(i) Any subsequent revision in curriculum and syllabus, other than changes specified in paragraph 4(5), shall be recommended by ETCOM to the Council for approval.

(ii) ETCOM shall engage in formal consultation with Examination Committee during the process of revision in curriculum and syllabus.

(iii) The revision assignment shall be undertaken by ETCOM at least every fifth year from the date of last revision or earlier if deemed necessary.

(7)** Presentation and Communication Skills Course (PCSC)

(i) There shall be a course on presentation and communication skills of 50 hours. (ii) PCSC shall be attended at CAF stage before commencement of training. Provided that this

course may be completed during or after the period of training before attempting CFAP examinations if the trainee: (a) is registered in direct training scheme available to holder of a recognized degree

under these regulations; or (b) has completed AFC and CAF or equivalent examinations and joins training by

December 31, 2015. (iii) As a condition for course completion for students who have not passed or obtained

exemption from Functional English by May 31, 2015, an assessment of writing skills shall be carried out by the Institute.

(iv) The following shall be exempt from PCSC: (a) A person who has commenced training on or before December 31, 2014; (b) Four-year degree holders from any recognized university (c) Candidates holding equivalence of four-year degree issued by HEC on the basis of

their professional qualification (d) Candidates who have completed PCSC – 1 applicable at the time of introduction of

PCSC under this regulation. (e) Candidate who are enrolled in and complete PCSC – 1 applicable at the time of

introduction of PCSC under this regulation.

*256th meeting of the Council held on August 7-9, 2014. ** 313th meeting of the Council held on April-25-26, 2019.

Directive 1.01


(8)* The presentation and communication skills course may be conducted by the Institute or other organizations including HEC recognized universities, RAETs ***as may be approved by the Institute.

(9)* The learning outcomes and methodology of these Presentation and Communication Skills Course are specified in Annexure – A.

(10) Course on Professional Values, Ethics and Attitude

(i) The Institute shall offer an online compulsory course on professional values, ethics and attitude.

(ii) The Institute may consider similar in -house courses offered by TOs as equivalent to ICAP’s course.

(iii) The course shall be completed by each trainee student during the period of training. Provided that a trainee student who qualify Module E and F examination by December, 2016 attempt shall be deemed to have completed the course.

5. EXEMPTION FROM EXAMINATIONS

(1) Application All persons seeking exemption from any examination shall be required to apply to the Institute on the specified exemption form along with the prescribed fee.

(2) Conditions for exemption Exemption from AFC and CAF examinations or any subject thereof shall be granted subject to the following conditions:

(i) Graduates from ‘Specified Degree Awarding Institutes (SDAI)’

(a) Persons who hold minimum four year relevant degree from ‘Specified Degree Awarding Institutes’ shall be eligible to claim exemption:

(i) from AFC without fulfilling any criteria; and

(ii) from subjects of CAF provided they fulfill the criteria specified in this paragraph.

(b) Criteria for exemption from CAF shall be as follows:

(i) the syllabus contents and learning outcomes of the subject match at least 70% with that of the prescribed syllabus and learning outcomes of the Institute or are of more advanced level; and

(ii)* person has secured minimum 60% marks or equivalent grades in aggregate and the subject from which exemption is sought.

(c) The procedure and criteria for granting the status of Specified Degree Awarding Institute is specified in directive 1.04.

(ii) Graduates with minimum 16 years of education from institutions other than Specified Degree Awarding Institutes

(a) Persons who hold degree with minimum 16 year of education from any local or foreign institution recognized by HEC, shall be eligible to claim exemption from the following papers after fulfilling the criteria specified in this paragraph: AFC-1 Functional English AFC-2 Business Communication AFC-3 Quantitative Methods AFC-4 Introduction to Information Technology CAF-1 Introduction to Accounting CAF-2 Introduction to Economics and Finance CAF-3 Business Law CAF-4 Business Management & Behavioural Studies

*256th meeting of the Council held on August 7-9, 2014. ***269th meeting of the Council held on October 14, 2015. ****285th meeting of the Council held on April 7 and 8, 2017 and 286th meeting of the Council held on May 10 and 11, 2017.

Directive 1.01


(b) Criteria for exemption shall be as follows:

(i)* Minimum 60% marks or equivalent grades in aggregate;

(ii) Minimum 60% marks or equivalent grades in relevant subject(s) from which the person is seeking exemption; and

(iii) The syllabus contents and learning outcomes of the subject match at least 70% with that of the prescribed syllabus and learning outcomes of the Institute or are of more advanced level.

(iii) Graduate with 14 years of education and certain non-graduates

(a) Persons holding a degree with 14 years of education from any degree awarding institution recognized by HEC or those holding, HSC, A Levels or other equivalent qualification shallbeeligibletoclaimexemptionfromthefollowingpapersafterfulfilling the criteria specified in this paragraph.*Provided that the candidates holding higher secondary school certificate shall not be eligible for exemption from Introduction to Accounting and Introduction to Economics and Finance after March 31, 2016:


AFC-2 Business

Communication





(b) Criteria for exemption shall be as follows:

(i) For graduates with 14 years of education:

(a) Minimum 60% marks or equivalent grades in aggregate;

(b) Minimum 75% marks or equivalent grades in relevant subject(s) from which the person is seeking exemption; and

(c) The syllabus contents and learning outcomes of the subject match at least 70% with that of the prescribed syllabus and learning outcomes of the Institute or are of more advanced level.

(ii) For persons with HSC or other equivalent qualification:

(a) Minimum 70% marks or equivalent grades in aggregate;

(b) Minimum 75% marks or equivalent grades in relevant subject(s) from which the person is seeking exemption; and


(iii) For persons with A Levels:

(a) Minimum two B Grades;

(b) Minimum B Grade in the subject(s) from which the person is seeking exemption; and


(iv) Professional qualifications

(a) Persons who have passed all examinations of the following accountancy bodies shall be eligible to claim exemption from papers of AFC and CAF specified under the name of each professional body:

(i) Association of Chartered Certified Accountants (ACCA) of UK



CAF-1 Introduction to Accounting CAF-5 Financial Accounting and Reporting–I


CAF-7 Financial Accounting and Reporting–II



*256th meeting of the Council held on August 7-9, 2014.

Directive 1.01


Provided that the exemption from ‘CAF-6 Principles of Taxation’ shall be granted to persons who have passed TX Taxation -Pakistan variant and exemption from ‘CAF-9 Audit and Assurance’ shall be granted to persons who have passed AAA Advanced Audit and Assurance.

(ii)* Chartered Institute of Management Accountants (CIMA) of UK


AFC-2 Business Communication AFC-3 Quantitative Methods




CAF-3 Business Law





(iii)** Institute of Cost and Management Accountants of Pakistan (ICMAP)

All papers of AFC and CAF stages

(iv) Pakistan Institute of Public Finance Accountants (PIPFA)


AFC-2 Business Communication AFC-3 Quantitative Methods




CAF-3 Business Law

(b) Other relevant professional bodies

Exemptions shall be granted on basis of qualification on a case to case basis by the Council.

(3) A person shall be eligible to claim exemption on the basis of different qualifications that the person holds.

(4) The reference to passing of examination in this scheme means attempting and passing the examinations of relevant qualification and does not include obtaining exemption from such examinations. ***Provided that, subject to the conditions imposed by the Council, this paragraph shall not apply on candidates who have gained professional qualifications of ICMAP and PIPFA after obtaining some exemptions from examinations of the said professional bodies.

6. FEES AND REFUNDS

(1) Fees

The schedule of fee shall be specified through separate directive.

(2) Refunds

Fee paid by a person shall not be refunded except in the following circumstances:

(i) Fee for registration as fulltime student shall be refunded if the person is found ineligible and applies to the Institute on prescribed form.

(ii) Fee for registration as a trainee student shall be refunded if the person is found ineligible for registration as trainee student and applies to the Institute on the prescribed form.

(iii) Fee for examinations shall be refunded in accordance with the provisions of bye-law 116.

*262nd meeting of the Council held on February 20, 2015. **264th meeting of the Council held on May 8 and 9, 2015. ***259th meeting of the Council held on December 11-12, 2014.

Directive 1.01


7. EXAMINATIONS

(1) Admission to examination

Persons shall be admitted to examinations if they:

(i) have been registered either as fulltime students or trainee students;

(ii) are eligible to appear in the examination, under the progression rules specified in this Scheme; and

(iii) have submitted examination form along with prescribed fee, within the specified dates.

(2) Scope of studies

(i) The syllabus of each subject along with indicative grid is attached as Annexure-A.

(ii) Any revision and amendment in legislation, standard, code, guideline and statement shall not be part of syllabus before six months period elapsed from the date of publication thereof. Provided that Finance Act or Ordinance, and notifications and circulars relating to Finance Act or Ordinance, issued four months prior to the date of examination shall be considered forming part of syllabus in case of CFAP.

(iii) In case of standards on accounting and auditing and code of ethics, the period of six months shall be counted from the date of publication thereof in Pakistan, by the Institute.

(iv) Standards on accounting and auditing and code of ethics, if revised and published or notified by the Institute, shall be considered forming part of syllabus after six months from the date of publication or notification by the Institute even if they are applicable on a later date.

*(2A) Scope of studies (Revised)

Effective from Summer 2019, paragraph (2) of this regulation shall be replaced with the following:

(i) The syllabus of each subject along with indicative grid is attached as Annexure-A.

(ii) Any revision and amendment in legislation, standard, code, guideline and statement shall not be part of syllabus before six months period elapsed:

(a) in case of legislation, from the date of publication thereof by the issuing authority;

(b) in case of revised or new standard, code, guideline and statement, from the date of publication of study material by the Institute or date of application prescribed by the issuing authority of the same, whichever is later; and

(c) in case of changes in existing standard, code, guideline and statement, from the date of publication or notification by the Institute even if they are applicable on a later date.

Provided that Finance Act or Ordinance, and notifications and circulars relating to Finance Act or Ordinance, issued four months prior to the date of examination shall be considered forming part of syllabus, in case of CFAP.

(3) Time and place of examination

(i) All examinations shall be held at such time and place as the Examination Committee may from time to time determine.

(ii) The Director Examination shall notify such information on the website by January 1, each year.

(iii) The Examination Committee shall have the power to change the time and place of examinations after giving prior notice to the examinees through any or all of the mediums, namely, website, email, short messaging service, Institute’s social networking sites and postal service.

* 302nd meeting of the Council held on September 5-6, 2018

Directive 1.01


(4) Open book examinations

(i) Examinees shall be permitted to carry books in certain examinations as have been specified below:

Paper Permitted book

CAF-7 Financial Accounting and Reporting – II Handbook of International Financial Reporting Standards

CFAP-1 Advanced Accounting and Financial Reporting

Handbook of International Financial Reporting Standards

*CFAP-2 Corporate Laws Anti-money Laundering Act, 2010 Anti-money Laundering Regulations, 2015

Central Depository Act, 1997

Listed Companies (Code of Corporate Governance) Regulations, 2019 and Public Sector Companies (Corporate Governance) Rules, 2013

Companies (Further Issue of Shares), Regulation 2018

Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2017

Companies (Postal Ballot) Regulations 2018

Companies Act, 2017

Companies Ordinance, 1984

Competition Act, 2010

Employees Contributory Fund (Investment in Listed Securities) Regulations 2018

Foreign Exchange Regulations Act, 1947 and Foreign Exchange Manual of State Bank of Pakistan

Insurance Ordinance, 2000

Listed Companies (Buy- Back of Shares) Regulations, 2019

Listed Companies (Prohibition of Insider Trading) Guidelines

Listed Companies (Substantial Acquisition of voting shares and Takeovers) Regulations, 2017

Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980

Modaraba Companies and Modaraba Rules, 1981

NBFC (Establishment and Regulation) Rules 2003

Pakistan Stock Exchange Rule Book

Prudential Regulations for Corporate /Commercial Banking of SBP

Public Offering Regulations 2017

Securities Act 2015

The Banking Companies Ordinance, 1962

The Non-banking Finance Companies and Notified Entities Regulations, 2008

Explanation : Only the Original Bare Acts,

Rules and Regulations made thereunder shall be permitted

* 297th meeting of the Council held on May 9,2018 and 221st Meeting of Examination Committee on October 26,2018

Directive 1.01


Paper Permitted book

CFAP-4 Business Finance Decisions Any three books

* CFAP-5 Advanced Taxation Income Tax Ordinance, 2001 and related rules

Sales Tax Act, 1990 and related rules

Federal Excise Act, 2005 and related rules

The Provincial Sales Tax Acts

The Islamabad Capital Territory (Tax on Services) Ordinance, 2001

Explanation : Only the Original Bare Acts and rules made thereunder shall be permitted

CFAP-6 Audit, Assurance and Related Services

Handbook of International Auditing and Assurance Pronouncements and Code of Ethics for Chartered Accountants

MSA-1 Financial Reporting and Assurance Professional

Any five books

MSA-2 Management Professional Competence

Any five books

(ii) Only original books duly bound shall be permitted. (iii) Examinees shall be permitted to highlight or underline the text in the permitted books. (iv) Any decision taken by the Institute regarding permission to carry a book in the examinations

shall be final.

(5) Use of unfair means

(i) An examinee shall be considered guilty of using unfair means if the examinee’s actions are likely to give an unfair advantage to the examinee or to any other examinee.

(ii) The unfair means may include but are not limited to:

(a) Cheating, helping or taking help from others while attempting an examination;

(b) Using electronic gadgets, other than those permitted by the Institute through notification, while attending the examination;

(c) Mentioning name/roll number/ any other identification mark or signing on answer script except on the specified portion which is specifically provided for this purpose; and

(d) Writing unsolicited remarks on the answer script.

(iii) The Examination Committee shall have the power to take appropriate action in the matter, which may include any of the following:

(a) Cancel the result of the paper in which the examinee is found guilty of using unfair means.

(b) Cancel results of any number of papers attempted by the examinee in addition to the paper in which the examinee is found guilty of using unfair means.

(c) Suspend admission to examination for a period deemed appropriate, but not exceeding two years.

(d) Suspend registration for a period deemed appropriate, but not exceeding two years.

* 297th meeting of the Council held on May 9,2018 and 221st Meeting of Examination Committee on October 26,2018

Directive 1.01


(6) Examination results

(i) The passing marks shall be 50% in each subject.

(ii) Only the marks obtained by persons in paper(s) in which they fail shall be disclosed to them.

(7) Review of answer scripts

(i) An examinee who fails in an examination may apply to the Institute within 30 days from the declaration of result, on a specified form after paying specified fee, for a review of answer script.

(ii) The review shall involve:

(a) Checking that the marking process is free from errors and omissions.

(b) Marks were correctly counted and reflected in the results of the examinee.

(iii) The response of the review application shall be sent to the applicant within 40 days of the receipt of application by the Institute.

(8) Special arrangements

(i) An examinee may apply to the Institute 20 days prior to the first day of the month in which examinations are to be held, for special arrangements required due to any health or physical condition.

(ii) The limit of 20 days prior notice may be waived or relaxed by the Institute in case of emergency or under circumstances beyond the control of the examinee.

(iii) The Institute shall have sole discretion to accept or reject the application or accept it to the extent deemed appropriate by the Institute.

(9) Persons not to involve in examination process

The following persons shall not involve in any process of paper setting, paper moderation, invigilation, exam supervision, paper marking, result moderation, result compilation and meeting of the Examination Committee where results are being discussed:

(i) Any person whose close relatives are appearing in any examination of the Institute. Close relative shall mean parents, spouse, children, grandchildren, brother, sister, son-in-law, daughter-in-law.

(ii) Any person who has coached a student for the purpose of institute’s examination and such student is appearing or has appeared in such examination. Provided that imparting training required under the bye-laws shall not be considered as coaching.

(iii) Any person who is associated with any institution involved in tuition or coaching of students for any examinations of the Institute or who has written or published any book for the guidance of the examinees.

(iv) Any person who has been found guilty of professional misconduct. Provided that the debarment shall be for a period specified by the Council.

(v) Any person who has conflict of interest of any nature.

(vi) Same restriction shall also apply to the members of Examination Committee and employees of the Institute.

8. USE OF DESIGNATION

(1) Persons who have passed the CFAP stage, have completed the training prescribed under the bye- laws and have completed required Presentation and Communication Skill Course may use the designation Certified Finance and Accounting Professional (CFAP).

(2) Persons who have passed CAF stage or equivalent examinations of the Institute and have completed required Presentation and Communication Skill Course may use the designation Certified in Accounting and Finance (CAF).

(3) Persons who have passed examinations of the Institute that are given equivalence with CAF under the transition specified in this Scheme and have completed required Presentation and Communication Skill Course shall be eligible for an equivalence certificate to that effect upon applying and paying the specified fee.

(4)* Persons who have gained CAF stage qualification on the basis of exemption policy of the Institute may also be eligible to use the designation Certified in Accounting and Finance (CAF) upon completing of one year training in a Training Organisation and after completing required Presentation and Communication Skill Course.

Directive 1.01


9.** PROHIBITION FOR USE OF CERTAIN DESIGNATION

Any person who has completed his training, or passed CA Intermediate Examination or part of Final Examination is prohibited from using the designation such as CA (Inter) or CA (CC) or CA (Group I, II) or Articles (Institute of Chartered Accountants of Pakistan) or any other designation purporting to convey a qualification of any sort on the letterhead, forms, business cards or on any other stationery or form of communication, other than those allowed under this regulation.

10. RULES OF PROGRESSION

(1) Appearance in the Examination

(i) Examinees shall be permitted to attempt CAF if they have passed or obtained exemption from all papers of AFC. Examinees appearing in CAF examination shall be permitted to attempt maximum five papers in one sitting.

(ii) Examinees who have completed eighteen months of training prescribed under the bye-laws on or before the first day of the month in which examination is to be held and have passed or obtained exemptions from all papers of CAF shall be eligible to attempt CFAP.

(iii)* Examinees who have passed or obtained exemptions from the following papers of CFAP shall be eligible to attempt ‘MSA-1 Financial Reporting and Assurance Professional Competence’:

(a) Advanced Accounting and Financial Reporting

(b) Audit, Assurance and Related Services

(iv)* Examinees who have passed or obtained exemptions from the following papers of CFAP shall be eligible to attempt ‘MSA-2 Management Professional Competence’:

(a) Business Management and Strategy

(b) Business Finance Decisions

Provided that the application of progression rules shall be subject to transition policy specified in this Scheme.

(2)* Appearance in Gateway Examinations

(i) A person who holds a four year degree from RDAI and obtains exemption from all papers

mentioned in paragraph 5(2)(ii) or a person who has passed all examinations of CIMA shall

have the option to appear in any of the following Gateway Examinations in place of the

examinations mentioned thereunder:

(a) GWE-1 Accounting reporting (60%) and Management accounting (40%)




(b) GWE – 2 Audit and assurance (50%) and taxation (50%)



(ii) This paragraph does not restrict such candidates to appear in the full length examinations

equivalent to Gateway Examinations irrespective of opting for Gateway Examination in any

previous attempts.

(3) Maximum number of attempts

(i) Examinees appearing in AFC shall be permitted a maximum of three attempts for each paper.

*Provided that examinees who have passed two papers in three attempts shall be permitted

two additional attempts for each remaining paper.

*262nd meeting of the Council held on February 20, 2015. **264th meeting of the Council held on May 8 and 9, 2015. ***259th meeting of the Council held on December 11-12, 2014.

Directive 1.01


(ii) Examinees appearing in CAF and CFAP shall be permitted a maximum of six attempts for each

paper. Provided that persons who have passed all papers except two papers of CAF shall be

permitted two additional attempts for each remaining paper of CAF and persons who have

passed all papers except three papers of CFAP shall have no limitation as regard the number

of attempts.

(iii)** Examinees appearing in Gateway Examinations shall be permitted a maximum of six attempts

for each Gateway Examination. An attempt for Gateway Examination shall be counted

towards its full length equivalent examinations simultaneously.

(iv) There shall be no limitation of attempts on examinees appearing in MSA.

(v) An attempt shall be counted when a person is issued the admit card and signs the attendance

sheet in the examination.

11. TRANSITION POLICY

(1) Equivalencies

(i) ***Students currently in transition who will not be able to pass their examinations under

the transition provisions by Summer 2018 will be required to pass their remaining papers as

follows:

(ii) The following shall be the subject equivalencies under the Education Scheme 2013:

Status after Summer 2018 attempt Effective from Winter 2018 attempt

they will be required to pass

Left with ITMAC paper MSA 1 – Financial Reporting and Assurance

Professional Competence

Left with Management Accounting paper MSA 2 – Management Professional Competence

Left with ITMAC and Management

Accounting

Two MSA

Left with any paper(s) other than ITMAC

and Management Accounting

Paper(s) he/she is left with

*256th meeting of the Council held on August 7-9, 2014. **264th meeting of the Council held on May 8 and 9, 2015. ***285th meeting of the Council held on April 7 and 8, 2017 and 286th meeting of the Council held on May 10 and 11, 2017

Directive 1.01


Module

Stages and subjects before the commencement of Education Scheme 2013

Stages and subjects in Education Scheme 2013

Assessment for Fundamental Competencies (AFC)

Certificate in Accounting and Finance

(CAF)

Certified Finance and Accounting Professional

(CFAP)

Foundation

A Functional English Functional English -

A Quantitative Methods Quantitative Methods -

B Introduction to Economics & Finance

Introduction to Economics & Finance

B

Introduction to Financial Accounting

Introduction to Accounting Financial Accounting and Reporting – I

B Mercantile Law - Business Law (Mercantile Law section only)

Intermediate

C

Financial Accounting

Financial Accounting and Reporting – II

C Taxation - Principles of taxation

C

Business Communication & Behavioural Studies

Business Communication

Business Management & Behavioural Studies

D Company Law

Business Law

D

Cost Accounting

Cost and Management Accounting

D Auditing Audit and Assurance

D

Information Technology

Introduction to Information Technology

-

Final

E

Information Technology Management, Audit and Control

-

E

Advanced Accounting & Financial Reporting

Advanced Accounting and Financial Reporting

E Corporate Laws - Corporate Laws

E

Business Management

Business Management and strategy

F Management Accounting - -

F Business Finance Decisions Business Finance Decisions

F Advanced Taxation Advanced Taxation

F

Advanced Auditing

Audit, Assurance and Related Services

(2) Transition of Final Stage (Modules E and F)

(i)* The first CFAP shall be offered in Winter 2016 attempt.

(ii)* The first MSA shall be offered in Summer 2017 attempt.

(iii) The persons who join training on or after January 1, 2015 shall be required to pass CFAP examinations and MSA to qualify as chartered accountants.

(iv) The persons who commence training before January 1, 2015 shall be eligible to appear in Modules E and F examinations up to Summer 2016 to qualify as chartered accountants.

(v) The persons who commence training before January 1, 2015 and are unable to qualify as chartered accountants by Summer 2016 attempt:

(a) shall be given credit in CFAP according to the equivalencies specified in this paragraph after Summer 2016 attempt;

(b) Up to Winter 2017 attempt, shall be required to pass remaining papers of CFAP and “Information Technology Management, Audit and Control” and “Management Accounting” based on last applicable syllabus of Module E and F to qualify as chartered accountants; and

Directive 1.01


(c) shall be subjected to regulation on limitation on attempts as a fresh examinee for remaining papers of CFAP.

(vi) Those persons who commence training before January 1, 2015 and are unable to qualify as chartered accountants by Winter 2017 attempt:

(a) shall be given credit in CFAP according to the equivalencies specified in this paragraph;

(b) shall appear in remaining papers of CFAP and MSA to qualify as chartered accountants; and

(c) shall be allowed six further attempts, for each paper of CFAP. Provided that those persons who pass or are exempted from any three papers of CFAP shall have unlimited number of attempts.

(vii) Effective from Winter 2016 attempt, the persons who join training before January 1, 2015 may opt in writing to obtain credit of their passed papers according to the equivalencies specified in this paragraph and attempt remaining papers of CFAP and MSA to qualify as chartered accountant. They shall be subjected to regulation on limitation on attempts as a fresh examinee for remaining papers of CFAP.

12. EDUCATION DELIVERY SYSTEM

The Education Delivery System is specified in Directive 1.02.

13. TRAINING REGULATIONS AND GUIDELINES

The Training Regulations and Guidelines are specified in Directive 1.03.

14. RELEVANT DEGREE AWARDING INSTITUTE (RDAI) AND SPECIFIED DEGREE AWARDING INSTITUTES (SDAI)

The procedure to grant the status of Relevant Degree Awarding Institutes and Specified Degree Awarding Institute to a university is specified in Directive 1.04.

15. REMOVAL OF DIFFICULTY

In case any difficulty of operational nature arises in implementation of these regulations, the Chairman ETCOM and the Chairman Examination Committee, may jointly take a decision which they deem necessary for the purpose of removing the difficulty.

*256th meeting of the Council held on August 7-9, 2014

Directive 1.01


ANNEXURE – A

SYLLABUS

Proficiency level and testing level mentioned against each content of the syllabus are explained as follows:

1. Proficiency Level

a. Level 1

This level requires understanding and awareness of the subject matter and related concepts. The candidates will be expected to have ability to understand the nature of basic concepts.

b. Level 2 This level requires good understanding and detailed evaluation of the subject matter and related concepts, along with the ability to apply concepts and skills in simple professional scenario. The candidates will be expected to have ability to provide reasonable justification and logical explanation to support their professional judgment and decision making.

c. Level 3 This level requires in-depth understanding of the subject matter and related concepts. The candidates will be expected to have ability to critically examine and evaluate all concepts and available information to make firm professional judgments and make decisions.

2. *Testing Level and assessment of contents of earlier stages of qualification

a. Technical contents assessed at earlier stages of qualification will be tested in later stages with a limit of 8 marks per topic in an attempt.

b. The contents of syllabus may classify topics at three testing levels from 1 to 3 with a maximum limit per question as 8, 20 and 25, respectively.

c. The overall marks of earlier stage topics and testing level-1 topics, as mentioned above, will have a maximum limit of 35 marks in aggregate in an attempt.

Note: *302nd meeting of the Council held on September 5-6, 2018

Directive 1.01


AFC-1 ASSESSMENT OF FUNDAMENTAL COMPETENCIES

*FUNCTIONAL ENGLISH

Objective

To ensure that candidates can communicate effectively in the English language.

Learning Outcome

On the successful completion of this paper candidates will be able to:

1 use a range of vocabulary correctly

2 construct sentences using correct grammar

3 demonstrate the ability of speed reading and comprehension.

Grid Weightage

Vocabulary 15-20

Practical use of Grammar 20-25

Comprehension and Speed reading (General) 10-15

Total 50

Syllabus Ref

Contents Proficiency Level

A Vocabulary

1 Meanings and application of vocabulary listed on:

a: “The Oxford 3000- Seventh Edition”, and

b: Any other list as the Institute may provide at any time before the conduct of Examination.

3

B Practical use of Grammar

1 Parts of speech 3

2 Rules of sentences 3

3 Phrases and idioms 3

4 Tenses 3

5 Direct and indirect speech 3

6 Active and passive voice 3

7 Punctuation 3

C Comprehension and Speed reading (General)

1 Comprehension 3

2 Speed reading 3

Note: *Syllabus has been revised in 264th meeting of the Council held on May 8 and 9, 2015.

Directive 1.01



*BUSINESS COMMUNICATION

Objective

To ensure that candidates can communicate effectively while performing their professional responsibilities.

Learning Outcome


1 comprehend concepts of business communication

2 demonstrate awareness of intra-personal and interpersonal skills

3 understand formats of basic business messages and message-writing etiquette

4 understand the utility of the internet with respect to business communication.

Grid Weightage

Concepts 10-15

Intra-personal and Interpersonal skills 20-25

Communication via the internet 10-15

Total 50

Syllabus Ref


A Concepts

1 Introduction to business communication 3

2 Communication process 2

3 Seven C’s of effective communication 3

B Intra-personal and inter-personal skills

1 Nature of Intra-personal communication 3

2 Nature of Interpersonal communication 3

3 Critical Thinking 3

4 Non-verbal communication 3

5 Verbal communication 3

6 Visual communication 2

7 Written Communication 3

C Communication via the internet

1 Website hosting (types and services) 1

2 Types of electronic communication 2

Note: *Syllabus has been revised in 264th meeting of the Council held on May 8 and 9, 2015.

Directive 1.01



QUANTITATIVE METHODS

Objective

To develop the ability to apply quantitative methods and statistics to business problems.

Learning Outcome

On completion of this paper the candidate will be able to:

1 understand basic mathematics to build a base for financial analysis and transform business problems into mathematical equations

2 apply financial mathematics to solve business problems

3 analyse business solutions and identify feasible, alternative optimum and unbounded solutions using graphical methods

4 evaluate maximised profit, minimised cost and feasible manufacturing quantity by using calculus

5 analyse production planning cases and formulate solutions using matrices

6 present collected data using diagrams, charts and graphs and evaluate common measures of dispersion and central tendencies

7 evaluate the impact of inflation and rebase numbers using indices

8 use statistical methods in analyzing historical data for decision making and estimating future outcomes

9 explain and apply probability theory

10 explain sampling and explain and carry out tests of significance.

Grid Weightage

Mathematics

Basic mathematics 10-15

Financial mathematics 15-25

Calculus 10-15

Matrices and determinants 10-15

Statistics

Statistical methods 20-25

Methods of least square and regression 5-10

Probability and probability distribution 5-10

Sampling and decision making 5-10

Total 100

Directive 1.01


Syllabus Ref


A Mathematics

a Basic mathematics

1 Exponential and logarithmic functions 2

2 Equation of straight line 2

3 Application of straight line in business and economics 2

4 Simultaneous equation- linear and quadratic 2

5 Coordinate system 2

6 System of linear inequalities and their graphical presentation 2

7 Factorisation of equations including factorisation by completion of squares

2

8 Arithmetic progression 2

9 Geometric progression 2

b Financial mathematics

1 Simple interest 2

2 Compound interest 2

3 Present value 2

4 Future values 2

5 Annuities 2

6 Internal rate of return 2

7 Interpolation and perpetuities 2

c Linear programming

1 Graphical solution to linear programming problems involving redundant constraints, bounded and unbounded feasible regions, no feasible solution and alternative optimum solution

2

d Calculus

1 Rules for differentiation- Sum, difference, product and quotient rules of differentiation

2

2 Marginal function, calculation of revenue, cost and profit of marginal unit 2

3 Use of second order derivatives; maxima, minima and point of inflexion 2

e Matrices and determinants

1 Fundamentals of matrices, addition, subtraction, multiplication, inverse of matrices

2

2 Solution of simultaneous linear equations using Cramer’s Rule and Matrix Inverse Method

2

B Statistics

a Presentation and use of data

1 Collection and tabulation of data 2

Directive 1.01


Syllabus Ref


2 Presentation through graphs, charts and diagrams, including stem and leaf display, box and whisker plot

2

3 Measures of central tendencies and measures of dispersions 2

b Index numbers

1 Index numbers, weighted index numbers, concept of purchasing power and deflation of income

2

c Methods of least square and regression

1 Scatter diagram, linear relationship, simple linear regression lines by method of least square

2

2 Simple linear correlation 2

3 Coefficient of correlation and determination 2

4 Rank correlation 2

d Probability and probability distribution

1 Counting techniques 2

2 Probability 2

3 Addition law for mutually exclusive and not mutually exclusive events. 2

4 Multiplicative laws for dependent and independent events 2

5 Binomial distribution 2

6 Poisson distribution 2

7 Hyper-geometric distribution 2

8 Normal distribution 2

e Sampling and decision making

1 Simple random sampling 2

2 Sampling distribution of mean 2

3 Standard error of mean 2

4 Sampling with and without replacement 2

5 Testing of hypothesis for population means, difference between population means and population proportion and difference between two population proportions

2

6 Single population variance based on test of Chi-square 2

7 Confidence interval for estimating population means, proportions and variance, and differences between proportions means, proportions and variance

2

8 Problems of determination of sample size for the study of population mean and proportion

2

Directive 1.01


AFC-4 ASSESSMENT OF FUNDAMENTAL COMPETENCIES INTRODUCTION TO INFORMATION TECHNOLOGY

Objective

To enable candidates to equip themselves with the fundamental skills and proficiency required to cope with today’s highly challenging IT oriented business environment.

Learning Outcome

The candidates will be able to:

1 describe and classify different elements of a computer system

2 describe the basic operations in commonly used operating systems

3 demonstrate performance level knowledge in Microsoft Excel

4 demonstrate performance level knowledge in Microsoft Word

5 demonstrate performance level knowledge in Microsoft PowerPoint.

Grid Weightage

Computer hardware and types of operating system 3-6

Microsoft Excel 18-22

Microsoft Word 12-18

Microsoft PowerPoint 8-12

Total 50

Syllabus Ref


A Computer hardware and operating systems

1 Central processing units (CPUs) – processor, hard disk, random access memory, read-only memory

1

2 Input devices – Key board, mouse, touch pads, magnetic ink character reader, optical mark reader, optical character reader, barcode reader and electronic point of sale.

1

3 Output devices – monitor, printer 1

4 Operating systems – DOS, Windows, Linux 1

5 Core Windows tasks – customize desktop and start menus, work with files and folders, log-on and log-off, search for information, lock the computer, use a screen-saver password, reset a password

1

B Microsoft Excel

1 Construction of formulae and application of constructed and built-in functions and formulae

2

2 Creating and modifying customized data formats 2

3 Using conditional formatting 2

Directive 1.01


Syllabus Ref


4 Protecting cells, worksheets and workbook 2

5 Merging workbooks 2

6 Importing and exporting data to and from Excel 2

7 Creating and editing charts and templates 2

C Microsoft Word 2010

1 Creating custom style for text, tables and lists 2

2 Creating and modifying tables 2

3 Creating and modifying a table of contents 2

4 Use of Review and Reference tab commands 2

D Microsoft PowerPoint

1 Creating new presentations from templates 2

2 Inserting and editing text-based content 2

3 Inserting, and editing tables, charts, diagrams, pictures, shapes, graphs and objects

2

4 Running and printing presentations 2

Directive 1.01


CAF-1

CERTIFICATE IN ACCOUNTING AND FINANCE *INTRODUCTION TO ACCOUNTING

Objective

To enable candidates to equip themselves with the fundamental concepts of accounts needed as a foundation for higher studies of accounting.

Learning Outcome


1 understand the nature of accounting, elements of accounts, double entry rules and conceptual framework for financial reporting.

2 identify financial transactions and make journal entries

3 prepare general ledger accounts and a trial balance

4 make period end adjustments prior to the completion of financial statements

5 have familiarity with the items shown on the face of statement of financial position and statement of comprehensive income.

6 prepare partnership accounts.

7 understand the basic concepts given in international accounting standards on inventories and Property, plant and equipment

Grid Weighting

Introduction to accounting and book keeping 20-30

Adjustments including corrections of errors 20-30

Preparation of financial statements and partnership records 20-30

Inventories and Property, plant and equipment 20-30

Total 100

Note: * Syllabus has been revised in 302nd meeting of the Council held on September 5-6, 2018.

Directive 1.01


Syllabus Ref

Contents Level

Proficiency Testing

A Introduction to accounting and bookkeeping

1 Introduction to accounting

Meaning of business

Mode of business organization (meaning) - sole proprietorship; partnership; limited company

Financial statements- components, responsibility, presentation, users

1 1

2 Conceptual Framework for Financial Reporting

Fundamental accounting concepts - accrual, consistency, true and fair view, materiality, prudence, completeness, going concern, substance over form

Elements of financial statements (meaning) - Assets, liabilities, equity, income, expense

2

1

3 Accounting equation 2 1

4 Double Entry book keeping system

Rules of debit and credit and Chart of accounts

Books of prime entry

Ledgers

Trial balance

2 2

B Adjustments including corrections of errors

1 Allowance for bad debts and write off 2 1

2 Prepayments and accruals 2 1

3 Bank reconciliation and related adjustments 2 2

4 Correction of errors in record keeping 2 2

C Preparation of financial statements and partnership records

1 IAS 1: Preparation of financial statements

Statement of financial position (items to be shown on the face)

Statement of Comprehensive Income (items to be shown on the face)

2 2

2 Preparation of partnership account 2 2

D Inventories & Property, Plant and equipment

1 IAS 2: Inventories 2 2

2 IAS 16: Property, plant and equipment (other than disclosure and revaluation)

2 2

*Testing Level and assessment of contents of earlier stages of qualification




Directive 1.01


CAF-2 CERTIFICATE IN ACCOUNTING AND FINANCE

INTRODUCTION TO ECONOMICS AND FINANCE

Objective

To enable candidates to equip themselves with the fundamental concepts of economics and finance needed as foundation for higher studies of finance.

Learning Outcome

The candidate will be able to:

1 understand the nature of micro-economics and its basic concepts

2 understand the nature of macro-economics and its relation with the measurement of economic growth

3 understand how the balance of payments of a country is worked out

4 understand the nature of banking systems

5 understand the basic function of financial markets.

Grid Weightage

Concepts of economics 5-10

Microeconomics 25-35

Macroeconomics 25-35

Introduction to banking system, financial markets and international trade 25-35

Total 100

Syllabus Ref


A Concepts of economics

1 Fundamentals of Economics 1

2 Economic systems 1

B Microeconomics

1 Demand 2

2 Supply 2

3 Equilibrium of demand and supply 2

4 Elasticity of demand and supply 2

5 Utility analysis and indifference curve 2

6 Laws of production 2

7 Cost and revenue curves 2

8 Equilibrium of firm in short and long run under perfect competition, monopoly, monopolistic competition and oligopoly

2

Directive 1.01


Syllabus Ref


C Macroeconomics

1 Measurement of national income including knowledge of basic concepts like GDP, GNP, NNP;

2

2 Consumption, saving and investment functions; 2

3 Multiplier and accelerator; 2

4 Growth and recession 2

5 Unemployment and inflation 2

6 Fiscal policy 2

7 Public and private finance 2

D Introduction to banking system, financial markets and international trade

a Banking system

1 Types of banks and financial institutions 1

2 Money and its value 1

3 Monetary policy 1

b Financial instruments and market-Meaning

1 Money market 1

2 Capital markets. 1

3 Derivative market 1

c International trade

1 Balance of trade and payment 2

Directive 1.01


CAF-3

CERTIFICATE IN ACCOUNTING AND FINANCE *BUSINESS LAW

Objective

To give students an understanding of the legal system and laws relating to Contract Act, Partnership Act, Negotiable Instruments Act, Companies Act and Securities Act.

Learning Outcome

The candidate will be able to demonstrate:

1 basic knowledge of the legal environment

2 comprehension of laws governing contracts, partnership and negotiable instruments

3 knowledge of the legal terminologies of company law and the basics of company incorporation

4 familiarity with the provisions governing the prospectus and shares

5 knowledge of the management of companies

6 familiarity with provisions relating to investment by companies, accounts and dividend

Grid Weightage

Introduction to legal system 4-6

Mercantile law

Contract Act, 1872 20-30

Partnership Act, 1932 10-15

Negotiable Instruments Act, 1881 5-10

50

Companies Act, 2017 and Securities Act, 2015

Preliminary and incorporation 5-10

Prospectus and share capital etc. 5-10

Management, administration and disclosure of interest 15-25

Investments, accounts and dividend etc. 10-20

Total 50

Note: * Syllabus has been revised in 324th meeting of the Council held on February 29, 2020

Directive 1.01


Syllabus Ref

Contents Proficiency

Level

Testing Level

A Introduction to the Legal System

1 Introduction to the law and its types (Civil and Criminal law) 1 1

2 Introduction to the Process of legislation in Pakistan 1 1

B Mercantile law

a Contract Act, 1872

1 Introduction to the Law of Contract 2 1

2 Offer and acceptance 2 1

3 Capacity of Parties 2 1

4 Consideration 2 1

5 Free consent 2 1

6 Legality of object and consideration and agreements opposed to public policy

2 1

7 Void agreement 2 1

8 Contingent contract 2 1

9 Quasi contract 2 1

10 Performance of a contract 2 1

11 Discharge of a contract 2 1

12 Remedies for breach of contract 2 1

13 Indemnity and guarantee 2 1

14 Pledge 2 1

15 Agency 2 1

b Partnership Act, 1932

1 Chapter I – Preliminary 2 1

2 Chapter II - The nature of partnership 2 1

3 Chapter III - Relations of partners to one another 2 1

4 Chapter IV - Relations of partners to third parties 2 1

c Negotiable Instruments Act, 1881

1 Notes, bills and cheques (Section 4 to 15) 1 1

2 Provisions relating to cheques (Section 122A to 131C) 2 1

C Companies Act, 2017 and Securities Act, 2015

a Preliminary and incorporation

1 Definitions (Section 2 and 118 of Companies Act, 2017) 1 1

2 Powers and functions of the Commission (Section 7 of Companies Act, 2017)

1 1

3 Provisions with respect to names of companies/its change (Section 10 to 13 of Companies Act, 2017)

2 1

4 Registration of memorandum and articles of association (Section 16 to 18 and 36 to 39 of Companies Act, 2017)

2

1

5 Business and objects of a company (section 26 of Companies Act, 2017)

1 1

Directive 1.01


Syllabus Ref

Contents Proficiency Level Testing Level

6 Memorandum of association (Section 27 to 35, 40 and 41 of Companies Act, 2017)

2 1

7 Association not for profit (Section 42 and 43 of Companies Act, 2017)

1 1

b Prospectus and share capital

1 Prospectus

(Section 87(2),(4),(5),(6),(7), 88(1-8), 90 to 93 of the Securities Act, 2015)

(Section 57 of Companies Acts, 2017)

1 1

2 Share capital (Section 58 to 62 and 85 of Companies Act, 2017)

1 1

c Management, administration and disclosure of interest

1 Commencement of business by a public company (Section 19 and 20 of Companies Act, 2017)

1 1

2 Registered office, publication of names etc. (Section 21, 22, 24, 25 of Companies Act, 2017)

2 1

3 Meeting and proceedings (Section 131 to 147 and 149 to 152 of Companies Act, 2017)

1 1

4 Appointment and Removal of Directors and Disqualification by the Commission (Section 153 to 165, 167,168, 170 to 171 ,174 and 176 to 185 of Companies Act, 2017)

1 1

5 Chief executive (Section 186 to 191 of Companies Act, 2017) 1 1

6 Chairman (Section 192 of Companies Act, 2017) 1 1

7 Secretary (Section 194 of Companies Act, 2017) 1 1

8 Share registrar (Section 195 of Companies Act, 2017) 1 1

9 Appointment of sole purchase / sale agents (Section 196 of Companies Act, 2017)

1 1

10 Disclosure of interest by directors; interest of other officers etc. and interested director not to participate or vote in proceedings of directors (Section 205 to 207 of Companies Act, 2017)

1 1

d Investments, accounts and dividends, etc.

1 Investment in associated companies and undertakings (Section 199 of Companies Acts, 2017)

2 1

2 Investment of companies to be held in its own name (Section 200 of Companies Acts, 2017)

1 1

3 Accounts of companies and directors’ report (Section 220, 223, 226, 227, 232 and 233 of Companies Act, 2017)

1 1

4 Quarterly financial statements of listed companies (Section 237 of Companies Act, 2017)

1 1

5 Dividends and manner and time of payment thereof (Section 240 to 243 of Companies Act, 2017)

1 1

Directive 1.01


CAF-4

CERTIFICATE IN ACCOUNTING AND FINANCE BUSINESS MANAGEMENT AND BEHAVIORAL STUDIES

Objective

To equip candidates with the fundamentals of management and behavioral studies.

Learning Outcome


1 demonstrate an understanding of the nature of management concepts and approaches

2 show familiarity with the structure of business organizations, their culture and the change process

3 demonstrate an understanding of human behavior

4 demonstrate an understanding of the concepts of motivation

5 show familiarity with the nature and kinds of leadership

5a Demonstrate an understanding with group dynamics and effective teamwork

6 show familiarity with the nature and importance of negotiation and conflict resolution

7 demonstrate a basic understanding of IT based management information systems.

Grid Weightage

Management concepts 25-35

Organizational process 20-30

Individual behavior and motivation 20-30

Leadership, negotiation and conflicts 20-30

Management information system 15-25

Total 100

Syllabus Ref


A Management concepts

1 Meaning 2

2 Functions 2

3 Classical approach 2

4 Behavioral approach 2

5 Management science approach 2

6 External factors – Competitors, suppliers, labour, customers 2

7 General environment - Political, legal, technological, economic, social 2

B Organizational process

1 Organizational structure - principles of organization, different ways of structuring organization

2

Directive 1.01


Syllabus Ref


2 Organizational change - nature of change process, resistance to change 2

3 Organizational culture - concept, dysfunctional aspect of culture 2

C Individual behavior and motivation

1 Perception 2

2 Attitude 2

3 Job satisfaction and stress 2

4 Maslow need hierarchy Model 2

5 Herzberg’s two-factor Theory 2

6 McClelland’s theory of needs 2

7 Goal setting 2

8 Management by objective 2

9 Self-efficacy 2

10 Reinforcement 2

11 Equity/organizational justice 2

12 Expectancy 2

D Leadership, negotiation and conflicts

1 Type of leadership 2

2 Theories of leadership 2

3 Roles, activities, skills of leaders 2

4 Group Dynamics and teamwork - types of groups, group formation, group structure, individual in groups, team work

2

5 Negotiation skills 2

6 Conflict resolution 2

E Management information systems

1 General system concepts of information technology 1

2 IT-based transaction processing systems 1

3 IT-based financial reporting systems 1

4 IT-based order processing and inventory control systems 1

5 IT-based personnel systems 1

6 Integrated IT systems 1

Directive 1.01


CAF-5

CERTIFICATE IN ACCOUNTING AND FINANCE *FINANCIAL ACCOUNTING AND REPORTING I

Objective

To provide candidates with an understanding of the fundamentals of accounting theory and basic financial accounting with particular reference to international pronouncements.

Learning Outcome


1 prepare statement of changes in equity and statement of cash flows (other than consolidated statement of cash Flow) in accordance with specified international pronouncements

2 interpret and evaluate the financial statement with the help of ratio analysis

3 prepare income and expenditure account, accounts from incomplete records and manufacturing account

4 understand the requirements for recognition and measurement of the elements of financial statements and concepts of capital and capital maintenance

5 account for transactions related to property, plant and equipment in accordance with international pronouncements

6 account for transactions related to government grants and provide disclosures for the same in accordance with international pronouncements

7 account for transactions related to impairment of assets (other than cash generating units), investment property and financing of assets in accordance with international pronouncements

8 understand the nature of revenue and account for the same in accordance with international pronouncements

Grid Weighting

Preparation of financial statements in accordance with IFRS and its interpretations 20-30

Preparation of income and expenditure account, accounts from incomplete records and manufacturing account

25-35

Other areas of IFRS 40-50

Total 100

Note: *Syllabus has been revised in 302nd meeting of the Council held on September 5-6, 2018.

Directive 1.01


Syllabus Ref Contents Level

Proficiency Testing

A Preparation of financial statements in accordance with IFRS and its interpretation

1 IAS 1 Preparation of financial statements (preparation of statement of changes in equity only)

2 1

2 IAS 7 Preparation of statement of cash flows (other than consolidated statement of cash flow)

2 2

3 Interpretation of financial statements and ratio analysis including limitations of financial statement and ratio analysis

2 2

B Preparation of income & expenditure account, accounts from incomplete records and manufacturing account

1 Accounting for non-profit organization / Income and expenditure account

2 2

2 Preparation of accounts from incomplete records 2 2

3 Maintenance of factory ledger and related accounting entries and preparation of manufacturing account.

2 2

C Other areas of IFRS

1 The conceptual framework for financial reporting

Recognition and measurement of the elements of financial statements

Concepts of capital and capital maintenance

2 1

2 IAS 16 Property, plant and equipment (revaluation and disclosure)

2 2

3 IAS 20 Accounting for government grants and disclosure of government assistance

2 1

4 IAS 23 Borrowing Costs 2 1

5 IAS 36 Impairment of Assets (other than cash-generating units CGU)

2 1

6 IAS 40 Investment Property (other than lease issues) 2 1

7 IFRS 15 Revenue from Contracts with Customers 2 2





Directive 1.01



PRINCIPLES OF TAXATION

Objective

To provide basic knowledge in the understanding of objectives of taxation and core areas of Income Tax Ordinance, 2001, Income Tax Rules 2002 and Sales Tax Act 1990 and Sales Tax Rules.

Learning Outcome

The candidate will be able to:

1 understand the objective of levy of taxation, and its basic concepts

2 understand the system of taxation in Pakistan

3 understand the historical background of taxation in Pakistan

4 understand constitutional provisions of taxation in Pakistan

5 understand and explain the basic ethics of taxation

6 understand and explain provisions of Income Tax law mainly relevant to individuals and association of persons

7 understand and explain Sales Tax law relevant to operational level tasks.

Grid Weightage

Objective, system and historical background, constitutional provisions and ethics 8-12

Income tax 60-70

Sales tax 20-30

Total 100

Syllabus Ref


A Objective, system and historical background, constitutional provisions

and ethics

a Basic concepts of taxation

1 Objectives 1

2 Basic concept 1

3 System of taxation in Pakistan

(Income Tax, Sales Tax, Federal Excise Tax, Capital Value Tax, Customs)

1

4 Historical background 1

b Constitutional provisions

1 Federal financial procedures

(Article 78 to 88 of the Constitution of Pakistan)

1

2 Provincial financial procedures

(Article 118 to 127 of the Constitution of Pakistan)

1

3 Distribution of revenues between Federation and the provinces (Article 160 to 165A of the Constitution of Pakistan)

4 Federal legislative lists relating to revenue generating measures (related part of Fourth Schedule to the Constitution of Pakistan)

Directive 1.01


Syllabus Ref


c Ethics

1 Ethics for tax legislation 2

2 Ethics for taxpayers and tax practitioners 2

3 Ethics for tax implementing authorities 2

4 Tax evasion and avoidance 2

B Income Tax

1 Chapter I – Preliminary (concepts of terms defined section 2 sub-section 1, 5, 5A, 6, 7, 9, 10, 11A, 19, 19C, 20, 21, 22, 23, 29, 29A, 29C, 36, 37, 38,

41, 44A, 46, 47, 49, 50, 51, 52, 53, 68)

1

2 Chapter II – Charge of tax (excluding section 4B, 5A, 7A) 2

3 Chapter III – Tax on Taxable income (Excluding Section 29A, 30, 31, 36, 49, 57A, 59AA, 59B, 65C, 65D and 65E)

2

4 Chapter IV – (Part I, II and III) – Common rules (Excluding Sections 78 and 79)

1

5 Chapter V Part I – Central concepts 2

6 Chapter V Part II Div I and II – Individuals 2

7 Chapter V Part III and Part VA – Association of persons 2

8 Chapter VII Part II – Taxation of foreign-source income of residents 2

9 Chapter IX Minimum Tax (Section 113) 2

10 Chapter X Part I – Returns 2

11 Chapter X Part II – Assessments 1

12 Chapter X Part III – Appeals 1

13 Chapter X Part VIII – Records, Information Collection and Audit (Section174 and 177)

2

14 The Income Tax Rules related to the above chapters of the Income Tax Ordinance 2001 shall also be examined

1

15 First and Second Schedule attached to the Income Tax Ordinance 2001 2

C Sales Tax

a Sales Tax Act 1990

1 Chapter I – Preliminary (concepts of terms defined Section 2 sub-sections 3, 5AA, 9, 11, 14, 16, 17, 20, 21, 22A, 25, 27, 28, 29A, 33, 35, 39, 40, 41, 43, 44, 46)

2

2 Chapter II – Scope and payment of tax 2

3 Chapter III – Registration 2

4 Chapter IV – Book keeping and invoicing requirements 2

5 Chapter V – Returns 2

b Sales Tax Rules, 2006

1 Chapter I – Registration, Compulsory registration and De-registration 2

2 Chapter II – Filing of return 2

3 Chapter III – Credit and Debit And Destruction of Goods 2

4 Chapter IV – Apportionment of Input Tax 2

Directive 1.01


CAF-7 CERTIFICATE IN ACCOUNTING AND FINANCE *FINANCIAL ACCOUNTING AND REPORTING II

Objective

To broaden the knowledge base of basic accounting acquired in earlier modules with emphasis on International Financial Reporting Standards.

Learning Outcome


1 prepare financial statements in accordance with the relevant law of the country and in compliance with the reporting requirements of the international pronouncements

2 account for transactions relating to non-current assets and operating segment

3 understand the implication of contingencies; changes in accounting policies, estimates and; errors, events occurring after reporting period and changes in foreign exchange rates

4 account for transactions relating to taxation

5 demonstrate knowledge of basic ethical issues in preparation and reporting of financial information

Grid Weighting

Preparation of financial statements in accordance with the Companies Act, 2017 and IFRSs

25-35

Accounting for non-current assets 30-40

Ethics and other areas of IFRS 30-40

Total 100

Note: * Syllabus has been revised in 302nd meeting of the Council held on September 5-6, 2018.

Directive 1.01


Syllabus Ref

Contents Level

Proficiency Testing

A Preparation of Financial Statements in accordance with the Companies Act 2017 and IFRS

1 Preparation of financial statements of limited companies in line with the requirement of the Companies Act, 2017 and International Financial Reporting Standards (excluding liquidations, reconstructions and mergers)

2 2

2 Preparation of consolidated financial statements (one subsidiary)

IFRS 3 Business combinations (goodwill and cost of investment)

IFRS 10 Consolidated financial statements (Preparation of consolidated statements of financial position and comprehensive income)

IAS 28 Investment in associates and joint venture (Equity method and test of one associate)

2 2

3 Accounting policies, changes in accounting estimates; and errors (IAS-8) 2 1

B Accounting for non-current Assets

1 IFRS 9 Classification, recognition and measurement of financial assets and liabilities Other than derivatives -Financial Instruments

1 1

2 IFRS 16 Leases (Excluding modification, sale and lease back and reassessment)

2 2

3 IAS 38 Intangible assets Recognition, de-recognition, measurement, amortization and measurement after recognition of non-current assets (including SIC 32 Intangible Assets – Web Site Costs)

2 2

4 IAS 41 Agriculture 2 1

C Ethics and other areas of IFRS

1 Ethics

Fundamental principles (sections 100 to 150 of the Code of Ethics for Chartered Accountants)

An understanding of ethics relating to preparation and reporting of financial information (Section 320 of Code of Ethics for Chartered Accountants)

2 1

2 IFRS 8 Operating Segment 2 1

3 Events occurring after the reporting period (IAS-10) 2 1

4 IAS 37 Provisions, contingent liabilities and contingent assets (including IFRIC 1 changes in existing decommissioning, restoration and similar liabilities)

2 2

5 IAS 12 Income Taxes (other than Business combination)

2 2

6 IAS 21 The effects of changes in foreign exchange rates (foreign exchange transactions)

2 1





Directive 1.01



COST AND MANAGEMENT ACCOUNTING

Objective

To equip candidates with techniques of cost accounting to provide a knowledge base for decision making skills.

Learning Outcome


1 establish the costs associated with the production of products and provision of services

2 demonstrate an understanding of different costing system

3 prepare various types of forecasts and budgets

4 apply the concepts of costing in the decision making process

5 demonstrate a functional knowledge of financial instruments

6 apply concept of time value of money

7 understand the concepts of sustainability reporting.

Grid Weightage

Costs associated with the production 15-20

Costing system 25-35

Budget and budgetary controls 35-45

Financial instruments, Time value of money and Sustainability reporting 20-30

Total 100

Syllabus Ref


A Costs associated with production

1 Basis of valuation - FIFO, weighted average, lower of cost and net realizable value

2

2 Economic Order Quantity 2

3 Safety stock 2

4 Re-order level 2

5 Manufacturing expenses - actual and applied 2

6 Over or under absorbed overhead 2

7 Production and service departments 2

8 Apportionment, allocation and absorption of service departments› overheads to production

2

9 Labour Costing 2

Directive 1.01


Syllabus Ref


B Costing systems

1 Marginal costing 2

2 Absorption costing 2

3 Manufacturing cost accounting cycle 2

4 Job order costing 2

5 Process costing 2

6 Treatment of Joint and By-Products 2

7 Cost of services rendered 2

8 Standard costing 2

9 Variance analysis-material, labour and overhead 2

10 Target costing 2

C Budget, budgetary controls and decision making

1 Planning, forecasting and budgeting of sales, cost and profit 2

2 Opportunity cost 2

3 Relevant cost 2

4 Breakeven analysis 2

5 Make or buy decisions 2

6 Pricing for special orders 2

7 Further processing decisions 2

D Financial instruments (basic functions), Time value of money and Sustainability reporting

1 Business Finance: Shares, debentures, bonds, futures, options, cap, floor, collar, swaps, forward

1

2 Computation and usefulness of net present value and internal rate of return

1

3 An introduction to sustainability reporting 1

Directive 1.01



AUDIT AND ASSURANCE

Objective

To acquire knowledge of theory, skill, techniques of auditing and to enable the students to understand International Standards on Auditing, Assurance and Ethics.

Learning Outcome


1 demonstrate knowledge of general concepts governing an audit

2 demonstrate working knowledge in respect of performance of simple audit procedures and understand the audit report requirement under the Companies Act, 2017

3 understand the requirement and application guidelines relating to some of the specific areas of audit procedures including external confirmation, review of subsequent event etc.

4 comprehend nature of engagements of review of interim financial statements

5 demonstrate familiarity with computer programming and IT controls relevant to financial reporting

6 respond on audit matters in the light of fundamental principles given in the Code of Ethics.

Grid Weightage

General concepts and principles of audit 15-20

Performance of audit and reporting 25-35

Specific areas 20-25

Computer programming and IT controls 10-15

Professional Ethics 10-15

Total 100

Syllabus Ref


A General concepts and principles of audit

1 Introduction to International Federation of Accountants 1

2 Introduction to international auditing and assurance standard setting body

1

3 Objective and general principles governing an audit (ISA 200) 2

4 Responsibility for the financial statements 2

5 Auditors responsibility to consider fraud (ISA 240) 2

6 Legal consideration relating to appointment and removal of auditors (sections 246 to 253 of the Companies Act, 2017)

2

7 Terms of Audit engagements (ISA 210) 2

B Performance of audit and reporting

1 Planning an audit (ISA 300) 2

2 Assessment of audit risks (ISA 315 and 330) 2

Directive 1.01


Syllabus Ref


3 Audit materiality (ISA 320) 2

4 Audit evidence (ISA 500) 2

5 Audit sampling (ISA 530) 2

6 Substantive procedures (ISA 330) 2

7 Tests of controls (ISA 330) 2

8 Analytical procedures (ISA 520) 2

9 Documentation (ISA 230) 2

10 Audit opinion and form of audit report under International Standards on Auditing and under the Companies Act, 2017 and Going Concern (ISA-570 Revised)

2

C Specific areas

1 External confirmations (ISA 505) 2

2 Subsequent events (ISA 560) 2

3 Written representation (ISA 580) 2

4 Consideration of related parties (ISA 550) 2

5 Using the work of internal auditors and auditor’s experts (ISA 610 and ISA 620)

2

6 Engagement to review financial statements 2400 2

D Computer programming and IT controls

1 Benefits and limitations of flowcharts 1

2 Types of flowcharts 1

3 General and application controls in IT systems/environment 2

4 Preventative, detective and corrective controls 2

5 Logical access controls 2

E Professional ethics

1 Fundamental principles (sections 100 to 150 of the Code of Ethics for Chartered Accountants)

2

2 Client and engagement acceptance (section 210 of the Code of Ethics for Chartered Accountants)

2

Directive 1.01


PCSC

CERTIFICATE IN ACCOUNTING AND FINANCE PRESENTATION AND COMMUNICATION SKILLS COURSE

50 Hours Course to be completed in any RAET or recognized institutes Learning outcomes of the Course

S. No. Particulars Weightage

1 Intellectual

Demonstrate openness and objectivity in giving and receiving feedback

10

2 Interpersonal and Communication

Present information in written and numeric form clearly. Depict awareness of clear communication

30

Demonstrate listening skills and understands given instructions 10

3 Professional skepticism and professional judgment

Probe and question the relevant facts 10

4* Write Essay on topics generally known to a school leaver 15

5* Write meaningful and effective Précis 10

6* Write business letter on a well explained scenario Write short business report on a well explained scenario

15

Total 100

Methodology

Method Numbers Hours

*Classroom lectures on presentation, group discussion and writing skills and practice

5 10

Formal presentations before a group:

• Attended 12 6.0 • Presented 6 3.0 • Facilitators feedback on presentations 2 6.0

Group Discussion on pre-seen and well prepared topics 4 8.0

*Essay writing on unseen topics 3 3.0

*Précis writing 4 3.0

*Write business letter on a well explained scenario 6 3.0 *Write short business report on a well explained scenario 3 3.0

*Feedback of trainer on essay, précis, letters and short business reports written by students

5.0

50.0

Note: *Syllabus has been revised in 264th meeting of the Council held on May 8 and 9, 2015. The Institute shall conduct a Writing Skills Test of I hour 15 minutes duration that shall carry 40 marks. Subject to a transition under Directive 1.01, passing of the Test shall be a condition for issuance of Course Completion Certificate.

Directive 1.01


Proficiency GWE 01 CERTIFICATE IN ACCOUNTING AND FINANCE

*GATEWAY EXAMINATIONS ACCOUNTING & REPORTING AND COST AND MANAGEMENT ACCOUNTING

Grid Weightage

Accounting and reporting

Preparation of financial statements in accordance with the Companies Act, 2017 and IFRSs including preparation of accounts from incomplete records

10-20

Preparation of consolidated financial statements and Accounting policies, changes in accounting estimates; and errors

15-25

Other areas of IFRS 20-30

Cost and management accounting

Cost, costing system and cost behavior 15-25

Decision making and financial management 15-25

Total 100

Contents Level

Proficiency Testing

Preparation of financial statements in accordance with the Companies Act, 2017 and IFRSs including preparation of accounts from incomplete records

Preparation of financial statements of limited companies in line with the requirement of the Companies Act, 2017 and International Financial Reporting Standards (excluding liquidations reconstructions and mergers)

2 2

Preparation of accounts from incomplete records 2 2

Preparation of consolidated financial statements and Accounting policies, changes in accounting estimates; and errors

Preparation of consolidated financial statements (one subsidiary)

IFRS 3 Business combinations (goodwill and cost of investment)

IFRS 10 Consolidated financial statements (Preparation of consolidated statements of financial position and comprehensive income)

IAS 28 Investment in associates and joint venture (Equity method and test of one associate)

2 2

Accounting policies, changes in accounting estimates; and errors (IAS-8) 2 2

Other areas of IFRS

IFRS 8 Operating Segment 2 1

IFRS 9 Classification, recognition and measurement of financial assets and liabilities Other than derivatives -Financial Instruments

1 1

IFRS 16 Leases (Excluding modification, sale and lease back and reassessment) 2 2


Directive 1.01


Contents Level

Proficiency Testing

Events occurring after the reporting period (IAS-10) 2 1

IAS 12 Income Taxes (other than Business combination) 2 2

IAS 21 The effects of changes in foreign exchange rates (foreign exchange transactions)

2 1

IAS 37 Provisions, contingent liabilities and contingent assets (including IFRIC 1 changes in existing decommissioning, restoration and similar liabilities)

2 2

IAS 38 Intangible assets Recognition, de-recognition, measurement, amortization and measurement after recognition of non-current assets (including SIC 32 Intangible Assets – Web Site Costs)

2 2

IAS 41 Agriculture 2 1

COST AND MANAGEMENT ACCOUNTING Proficiency

Level

Inventory, Costing system and cost behaviour 2

Economic Order Quantity 2

Safety stock 2

Re-order level 2

Manufacturing expenses -actual and applied 2

Over or under absorbed overhead 2

Costing systems

Marginal costing 2

Absorption costing 2

Job order costing 2

Process costing 2

Treatment of Joint and By-Products 2

Standard costing 2

Relevant cost

Variance analysis-material, labour and overhead 2

Decision making

Breakeven analysis 2

Make or buy decisions 2

Pricing for special orders 2

Further processing decisions 2

Utilization of spare capacity 2

Time value of money

Computation of net present value and internal rate of return 2

Directive 1.01


GWE 02 CERTIFICATE IN ACCOUNTING AND FINANCE

*GATEWAY EXAMINATIONS AUDIT & ASSURANCE AND TAXATION

Grid Weightage

Audit and assurance

General concepts and principles of audit; Performance of audit and reporting 25

Specific areas and control systems 20 Professional ethics 5

Taxation

Income tax 35

Sales tax 15

Total 100

AUDIT AND ASSURANCE Proficiency

Level

Objective and general principal governing an audit (ISA 200) 2

Responsibility for the financial statements 2

Auditors responsibility to consider fraud (ISA 240) 1

Terms of Audit engagements (ISA 210) 2

Performance of audit and reporting

Planning an audit (ISA 300) 2

Assessment of audit risks (ISA 315) 2

Audit materiality (ISA 320) 2

Audit evidence (ISA 500) 2

Audit sampling (ISA 530) 2

Substantive procedures (ISA 330) 2

Tests of controls (ISA 330) 2

Analytical procedures (ISA 520) 2

Documentation (ISA 230) 2

Understanding of audit opinion and form of audit report under the Companies Act, 2017

2

Specific areas

External confirmations (ISA 505) 2

Subsequent events (ISA 560) 2

Written representation (ISA 580) 2

Consideration of related parties (ISA 550) 2

Using the work of component auditors, internal audits and auditor’s experts (ISA 610 and ISA 620)

2

Review of interim financial statements by the independent auditor (ISRE 2400) 2

IT Controls

Control design 1

Note: *Syllabus has been revised in 260th meeting of the Council held on January 8, 2015.

Directive 1.01



General controls 2

Preventative, detective and corrective controls 2

Audit trails 2

Professional ethics

Fundamental principles (sections 100 to 150 of the Code of Ethics for Chartered Accountants)

2

Client and engagement acceptance (section 210 of the Code of Ethics for Chartered Accountants)

2

TAXATION

INCOME TAX

Chapter I – Preliminary (concepts of terms defined in section 2 sub-section 1, 5, 5A, 6, 7, 9, 10, 11A, 19, 19C, 20, 21, 22, 23, 29, 29A, 29C, 36, 37, 38, 41, 44A, 46, 47, 49, 50, 51, 52, 53, 68)

1

Chapter III – Tax on Taxable income (Excluding Section 29A, 30, 31, 36, 49, 57A, 59AA, 59B, 65C, 65D and 65E)

2

Chapter IV – (Part I, II and III) – Common rules (Excluding Sections 78 and 79) 1

Chapter V Part I – Central concepts 2

Chapter V Part II Div I and II – Individuals (Excluding Section 88A) 2

Chapter V Part III – Association of persons 2

Chapter VII Part II – Taxation of foreign-source income of residents 2

Chapter x Part I – Returns 2

Chapter x Part II – Assessments 1

Chapter x Part III – Appeals 1

Chapter x Part VIII – Records, Information Collection and Audit (Section174 and 177) 2

The Income Tax Rules related to the above chapters of the Income Tax Ordinance 2001 shall also be examined

1

First and Second Schedule attached to the Income Tax Ordinance 2001 2

Sales Tax

Sales Tax Act 1990 2

Chapter I – Preliminary (concepts of terms defined Section 2 sub-sections 3, 5AA, 9, 11, 14, 16, 17, 20, 21, 22A, 25, 27, 28, 29A, 33, 35, 39, 40, 41, 43, 44, 46)

2

Chapter II – Scope and payment of tax 2

Chapter III – Registration 2

Chapter IV – Book keeping and invoicing requirements 2

Chapter V – Returns 2

SalesTaxRules,2006

Chapter I – Registration, Compulsory registration and De-registration 2

Chapter II – Filing of return 2

Chapter III – Credit and Debit Notes 2

Chapter IV – Apportionment of Input Tax 2

Directive 1.01


CFAP – 1 CERTIFIED FINANCE AND ACCOUNTING PROFESSIONAL *ADVANCED ACCOUNTING AND FINANCIAL REPORTING

Objective

To develop in-depth understanding and application abilities of the requirements of the international pronouncements, the Companies Act, 2017, and other applicable regulatory requirements in respect of presentation of financial statements and financial reporting.

Learning Outcome


1 prepare financial statements in accordance with the international pronouncements and under the Companies Act, 2017

2 evaluate and analyze the financial data for arriving at firm decision about the accounting treatment and reporting of the same

3 prepare financial statements of small and medium sized entities in accordance with the Companies Act, 2017 and applicable reporting framework

4 prepare financial statements of retirement benefit funds in accordance with the international pronouncements

5 understand reporting requirement under the laws specific to insurance, banking companies and mutual funds.

Grid Weightage

Group financial statements 25 – 35

Financial reporting 50 – 60

Specialized Financial Statements and Areas 10 – 20

Total 100

Syllabus

Ref

Contents Level

Proficiency Testing

A Group financial statements

1

Preparation of group financial statements

IFRS 3 Business Combinations

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IAS 27 Separate Financial Statements

IAS 28 Investments in Associates and Joint Ventures

3 3

2 IAS 7 Preparation of statement of cash flows (only Consolidated) 3 2

3 IAS 21 The Effects of Changes in Foreign Exchange Rates (including IFRIC 22)

3 1


Directive 1.01


Syllabus

Ref

Contents Level

Proficiency Testing

B Financial reporting

1 Financial instruments

IFRS 7 Financial Instruments: Disclosures

IFRS 9 Financial Instruments (including IFRIC 16 & 19)

IAS 32 Financial Instruments: Presentation

3 2

2 Employees benefit and share based payments

IFRS 2 Share-based Payment

IAS 19 Employee Benefits (including IFRIC 14)

3 2

3 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 3 1

4 IFRS 13 Fair Value Measurement 3 1

5 IFRS 15 Revenue From Contracts with Customers 3 2

6 IFRS 16 Leases 3 2

7 IAS 12 Income Taxes (including SIC 25) 3 2

8 IAS 24 Related Party Disclosures 3 1

9 IAS 33 Earnings per Share 3 2

10 IAS 34 Interim Financial Reporting (including IFRIC 10) 3 1

11 IAS 36 Impairment of Assets 3 2

12 IAS 40 Investment Property 3 1

C Specialized Financial Statements and areas

1 Small and medium sized entities 1 1

2 Banks 1 1

3 Mutual funds 1 1

4 Insurance companies 1 1

5 IAS 26 Accounting and Reporting by Retirement Benefit Plans 3 1

6 Specialized area of IFRSs

IFRS 1 First-time Adoption of International Financial Reporting Standards

IFRS 4 Insurance Contracts

IFRS 6 Exploration for and evaluation of Mineral Resources

IFRS 14 Regulatory Deferral Accounts

IAS 29 Financial Reporting in Hyperinflationary Economies (including IFRIC 7)

1

1

7 Overview of Islamic Accounting Standard issued by ICAP 1 1

8 Overview of IPSASs and The Conceptual Framework for General Purpose Financial Reporting by Public Sector

IPSAS 1 Presentation of Financial Statements

IPSAS Financial Reporting Under the Cash Basis of Accounting

1 1





Directive 1.01


CFAP – 2 CERTIFIED FINANCE AND ACCOUNTING PROFESSIONAL

CORPORATE LAWS

Objective

To develop in-depth knowledge, understanding and application skills of corporate laws most relevant in local corporate environment in general and required for secretarial practices, in particular.

Learning Outcome


1 identify, evaluate and analyze different situations arising in performing the professional duties with reference to applicable corporate laws

2 perform secretarial practices

3 demonstrate working knowledge of meaning, formation and working of non-banking financial institutes

4 demonstrate awareness of legal provisions in respect of compromise, arrangements, amalgamation and reconstruction of companies, winding up of limited and unregistered companies

5 demonstrate awareness of laws, rules and regulations related to banking companies, insurance companies, securities, issue of capital, listing, modarba, competition, anti-money laundering and foreign exchange

6 recognize ethical and professional issues and act appropriately.

*Grid Weightage

Companies Act, 2017 (Section 1 to 275) and relevant rules 30-40

Mediation, Arbitration, Arrangement ,Reconstruction, Management, Winding up and other related matters under Companies Act, 2017and Non-Banking Finance Companies

15-25

Other laws and regulations, governance, ethics and professionalism 40-50

Total 100

Syllabus Ref


Level

A Companies Act, 2017 (Section 1 to 275) and relevant rules

1 Companies Act, 2017 (Section 1 to 275) 3

2 Companies (Postal Ballot) Regulations, 2018 2

3 First, Second and Third Schedules of the Companies Act, 2017 3

4 Listed Companies (Buy- Back of Shares) Regulations, 2019

3

5 Employees Contributory Fund (Investment in Listed Securities) Regulations 2018

3

6 Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2017

3

7 Companies (Further Issue of Shares), Regulation 2018 3

Note: *Grid has been revised in 310th meeting of the Council held on February 15, 2019.

Directive 1.01


Syllabus Ref


Level

B Mediation, Arbitration, Arrangement, Reconstruction, Management, Winding up and other related matters under Companies Act, 2017 and Non-Banking Finance Companies

a Non-Banking Finance Companies

1 Companies Ordinance , 1984 (Section 282A to 282M) 3

2 NBFC (Establishment and Regulation) Rules 2003- Rules 1 to 7 3

3 The Non-banking Finance Companies and Notified Entities Regulations, 2008 (Regulation 2, 3, 9, 10, 15B, 16-18, and 25)

3

b Mediation, Arbitration, Arrangement and Reconstruction

1 Companies Act, 2017 (Section 276 to 292) 3

c Winding up and other matters

1 Companies Act, 2017 (293-302, 304-306,315-321,323,325, 329, 334-337, 338 , 339-341, 342, 344-351, 353,354, 356-392, 406-407, 416-419, 424, 426-429, 432-447, 451-453, 464,466-468,471-473)

2

C Other laws and regulations, governance , ethics and professionalism

a Other laws and regulations

1 Securities Act 2015 (Section 2, 63-65, and 87-131) and Relevant Rules and Regulations made thereunder

2

2 Rules and Regulations related to prospectus and statement in lieu of prospectus

2

3 Pakistan Stock Exchange Rule Book (Chapter 5) 2

4 Public Offering Regulations 2017 Chapter I [excluding 2 (i), (iii), (xvi), (xvii), (xxii), (xxiv), (xxv), (xxvii),

(xxix), (xxx), (xliii), (xliv), (xlvi), (xlvii), (xlviii), (liii), (liv), (lv), (lvi), (lvii)]

Chapter II

Chapter III

Chapter IV

Chapter V

First Schedule

2

5 Listed Companies (Prohibition of Insider Trading) Guidelines 2

6 Central Depository Act, 1997 (Section 1-19) 2

7 Foreign Exchange Regulations Act, 1947 (Section 1-9 and 12) and Foreign Exchange Manual of State Bank of Pakistan (Chapter XIX and XX)

2

8 Listed Companies (Substantial Acquisition of voting shares and Takeovers) Regulations, 2017

2

9 Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (section 2, 4 to 23, 33, 37, 41 and 42 ) and Related Modarba Rules, 1981

2

Directive 1.01


Syllabus Ref


Level

10 Competition Act, 2010 (Chapter I and II) 2

11 Insurance Ordinance, 2000 (Part I, II, III, IV, V and VI) 2

12 The Banking Companies Ordinance, 1962 (Part I, II, II-A & III) 2

13 Prudential Regulations for Corporate /Commercial Banking of SBP (PART – A Definitions, Regulations R-1-R-10)

2

14 Anti-money Laundering Act, 2010, Anti-money Laundering Regulations, 2015 (Regulations 4, 5, 7 and Appendix I and II)

2

b Governance, ethics and professionalism

1 Ethics as organizational culture (Merit, fairness, benevolence, confidentiality)

3

2 Fiduciary duty of directors and corporate executives 3

3 Listed Companies (Code of Corporate Governance) Regulations, 2019 and Public Sector Companies (Corporate Governance) Rules, 2013

3

4 Dealing with conflict of interest situations and whistle blowing policy 3

Directive 1.01



BUSINESS MANAGEMENT AND STRATEGY

Objective

To develop competence of formulation and implementation of business strategies.

Learning Outcome


1 prepare business vision and mission statements

2 analyze and assess external and internal environment and resources for the purposes of formulation of business strategy

3 formulate business strategies and make strategic choices

4 prepare long term business objective and plans

5 manage human resources

6 participate in making decision on entity›s social responsibility

7 participate in development and implementation of marketing strategy

8 understand Supply Chain Management.

Grid Weightage

Formulation and implementation of strategy 35-40

Strategy and Management of information technology 15-20

Human Resource Management 15-20

Marketing and supply chain management 15-20

Corporate social responsibility and business ethics 15-20

Total 100

Syllabus Ref


A Formulation and implementation of strategy

a Formulation of strategy

1 Development of business vision and mission 3

2 Developing strategic, tactical and operational level strategies 3

b Analysis

1 Porter’s Five Forces model 3

2 PESTEL analysis 3

3 Boston consulting group matrix 3

4 Competitor analysis 3

5 Competitive strategies of cost leadership and differentiation 3

6 Resource audit 3

Directive 1.01


Syllabus Ref


7 Outsourcing 3

8 Value chain analysis 3

9 SWOT analysis 3

10 Gap analysis 3

11 Benchmarking 3

12 Future basing - Scenario planning 3

c Risk management

1 Categories of risk and risk identification tools 3

2 Analysis and documentation of risk 3

3 Strategies for managing risk 3

d Choices

1 Establishing long term objectives 3

2 Generating, evaluating and selecting strategies 3

e Implementation of strategy

1 Establishing policies 3

2 Resource allocation 3

3 Evaluation of strategies 3

4 Strategic controls – measurement 3

5 Strategic controls – evaluation 3

6 Strategic controls - revisiting strategies 3

7 Balance Scorecard 2

8 Key Performance Indicators 2

9 Business process re-engineering 3

10 Change management process 3

11 Project management-quality, cost and time 2

B Strategy and Management of information technology

1 Role of IT in collection of information, planning and decision making 3

2 Formulation of IT strategy 2

3 IT Control framework COBIT 2

4 IT Control activities 2

5 IT Control monitoring 3

C Human Resource Management

a Recruitment

1 The purpose and forms of personnel specifications in the recruitment of personnel

3

2 Identifying competencies and other attributes required 3

3 Benefits and costs of new or additional personnel 3

Directive 1.01


Syllabus Ref


4 Methods of recruitment 2

b Human resource development and working environment

1 Motivating and supporting employees 3

2 Training, education and development 3

3 Staff appraisal styles and the assessment of competence models 2

4 Incentives and rewards 2

5 Purpose and procedures of health , safety and security requirements 3

6 Conflict resolutions 3

7 Organization development 2

D Marketing and supply chain management

a Marketing

1 Marketing strategies, planning and implementing (including Service Oriented Business)

2

2 Assessing the nature and size of the market using internal records, market intelligence, market research

2

3 Product life cycle 3

4 Product positioning and branding strategies 2

5 Market segmentation strategies 2

6 Advertising and promotion strategies 3

7 Global marketing, opportunities and threats 2

8 Franchising, licensing, joint venture and alliances 3

9 World Trade Organization 2

b Supply chain management

1 Concept and process of procurement 2

2 Vendor development and management 2

3 Inventory Management, ware housing and logistics 2

4 Production management 2

E Corporate social responsibility and business ethics

1 The concept of sustainability and corporate social responsibility 3

2 Social influences of an entity’s strategy development 2

3 Corporate Social Responsibility as a non-financial performance indicator 3

4 Ethical behaviour and professionalism 3

Directive 1.01



BUSINESS FINANCE DECISIONS

Objective

To develop competence and abilities to analyze complex financial information for strategic financial decisions.

Learning Outcome


1 utilize financial analysis techniques

2 ascertain value of securities and financial instruments

3 identify, document and manage the financial risks

4 evaluate and analyze merger, demerger, acquisitions and expansions and advise thereon

5 take production decisions, ascertain price, accept, reject and negotiate special orders

6 use management and costing tools to control cost of products and services.

Grid Weightage

Investment appraisal and decision making 40-60

Valuation 15-20

Risk management 15-20

Management controls 10-20

Total 100

Syllabus Ref


A INVESTMENT APPRAISAL AND DECISION MAKING

a Cost of capital

1 Cost of equity, cost of debt and weighted average cost of capital (WACC) 3

2 Capital Asset Pricing Model (CAPM) 3

3 Arbitrage Pricing Theory (APT) 3

4 Bond’s return analysis - yield to maturity or yield to call etc. 3

b Investment Appraisal

1 Project analysis using NPV, APV, IRR, MIRR, EIRR, Profitability Index and Payback (including the effect of inflation)

3

2 Project analysis using ratio analysis 3

3 Application of Monte Carlo simulation to investment appraisal 3

4 Sensitivity analysis 3

5 Portfolio analysis 3

Directive 1.01


Syllabus Ref


6 Capital rationing 3

7 International investment appraisal 3

c Decision Making

1 Make or buy decisions 3

2 Pricing for special orders 3

3 Further processing decisions 3

4 Decision with limiting factors 3

5 Introduction to mathematical programming and linear programming, formulation of problems, graphical solutions, limitations of linear programming and shadow price concept. (excluding simplex method)

3

6 Dividend policy, optimal capital structure and MM theory 3

7 Decision tree 3

B VALUATION

1 Equity securities 3

2 Debt securities 3

3 Appraisals on business valuation, acquisitions, mergers, demergers, spin off, spin out and new project including sensitivity analysis

3

4 Financial and capital structuring and its effects on business valuation - Modigliani and Millar theory, Millar model, Hamada equation

3

C RISK MANAGEMENT

1 Hedging interest rate : Futures, Options, Swaps, Swaptions and Forward agreement

3

2 Hedging Foreign Exchange : Currency futures, Swaps, Options, Forward, Swaptions and Money Market hedge

3

3 Commodity and security: Forward and future contracts 3

D MANAGEMENT CONTROLS

1 Variance analysis 3

2 Transfer pricing 3

3 Working capital management 3

4 Inventory management - economic order quantity and inventory level decisions

3

5 Debtor/creditor management - policies, financing, factoring, discount 3

6 Cash management - Liquidity, cash flow forecasting, short term investments

3

7 Forecasting and budgeting 3

Directive 1.01



ADVANCED TAXATION

Objective

To develop capability to perform duties of a professional accountant or support tax consultant.

Learning Outcome


1 develop expert knowledge of Income Tax, Sales Tax and Federal Excise Duty law in Pakistan (excluding case laws)

Grid Weightage

Income tax laws 50-55

Sales tax laws 30-35

Federal excise laws 10-15

Professional values, ethics and attitude 5-10

Total 100

Syllabus Ref


Level

A Income tax laws

1 The Income Tax Ordinance, 2001 3

2 Notifications, Rules, General orders and Circulars issued under the Income Tax Ordinance, 2001 excluding specific double taxation agreements

3

B Sales tax laws

1 The Sales Tax Act, 1990 3

2 The Provincial Sales Tax 3

3 The Islamabad Capital Territory (Tax on Services) Ordinance, 2001 3

4 Notifications, Rules, General orders and Circulars issued under the Sales Tax Act, 1990

3

C Federal excise laws

1 The Federal Excise Act, 2005 (Chapters I and II only) 2

2 Notifications, Rules, General orders and Circulars issued under the Federal Excise Act, 2005 relevant to Chapters I and II only

2

D Professional values, ethics and attitude

1 Principle of fair tax legislation and tax administration 2

2 Ethics for tax payers and tax practitioners 3

3 Tax evasion and avoidance 3

Directive 1.01



AUDIT, ASSURANCE AND RELATED SERVICES

Objective

To develop competence which is necessary for performing audit, assurance and other related services in accordance with the international and local pronouncements.

Learning Outcome


1 comprehend professional environment

2 perform assurance services in accordance with the international and local pronouncements

3 make professional judgment at all level of assurance and non assurance services

4 conclude and formulate opinion on complex matters of assurance services

5 consider and demonstrate professional attitude while performing assurance and non-assurance services.

Grid Weightage

Performance of audit 45-55

Audit conclusion and reporting 20-30

Other assurance engagements and related services 10-15

Professional Ethics, Quality Control and current development 10-15

Total 100

Syllabus Ref.


Level

A Performance of audit

a Performance of audit – General

1 Overall Objectives of the Independent Auditor and the Conduct of an Audit in accordance with International Standards on Auditing

3

2 Initial engagements and opening balances 3

3 Agreeing the terms of Audit engagement 3

4 The planning and mobilization phase 3

5 Risk assessment procedures and response to risks 3

6 Internal Controls (including Test of controls) 3

7 Audit materiality 3

8 Sampling and other means of testing 3

9 Audit evidence(including Specific considerations for Selected Items) 3

10 Substantive tests (including Analytical Procedures) 3

Directive 1.01


Syllabus Ref.


11 Responsibility to consider fraud 3

12 Evaluation of misstatements identified during the audit 3

13 Consideration of laws and regulations 3

14 External confirmations 3

15 Related Parties 3

16 Audit documentation 3

17 Communication with the management and those charged with governance (including communication of deficiencies in internal controls)

3

18 Subsequent events 3

19 Management representation 3

b Performance of audit – Specific

1 Going Concern 3

2 Fair value measurements and accounting estimates 3

3 Entities using service organizations 3

4 Work of expert and internal auditor 3

5 Special consideration - Audit of group financial statements (including work of component auditors)

3

B Audit conclusions and reporting

a Audit Report

1 Unmodified audit report 3

2 Modification in audit report 3

3 Emphasis of matter and other matters in audit report 3

4 Communicating key audit matters in the independent Auditor’s Report 3

5 Reporting consideration on comparative information 3

6 Reporting consideration on other information in document containing financial statements

3

7 Assurance Reports on Controls at a Service Organization 3

8 Audit report under the Companies Act, 2017 3

b Audit and Reporting on Specialized Areas

1 Audit of special purpose financial statements prepared in accordance with special purpose framework

3

2 Audit of single financial statements and specific elements, accounts or items

3

3 Engagement to report on summary financial statements 3

4 Auditing Financial Instruments 2

5 Understanding of provisions related to audit and accounts under the Banking Companies Ordinance 1962

2

Directive 1.01


Syllabus Ref.


6 Understanding of provisions related to audit and accounts under the Insurance Companies Ordinance 2000

2

C Other assurance engagement and related services (Including Reporting

on relevant services)

a Other assurance engagement

1 Review Engagements 3

2 Assurance Engagements other than audits or review of historical financial information

3

3 Examination of prospective financial statements 3

b Related services

1 Agreed-upon procedures 3

2 Compilation engagements 3

3 Assurance engagements to Report on the compilation of Pro Forma Financial Information included in Prospectus

3

4 Services under the provisions of corporate laws 3

5 Services under the provisions of tax laws 3

D Professional Ethics, Quality Control and current development

1 Code of Ethics issued by The Institute of Chartered Accountants of Pakistan 3

2 Quality control – ISQC 1, ISA 220, quality control framework of ICAP, Quality Assurance Board of ICAP

3

3 Acceptance and continuance of client including legal, professional and ethical consideration relating to appointment and removal of auditor

3

4 Current development in auditing profession Exposure draft issued by IAASB, Draft conceptual framework and Other development projects of IAASB

2

5 Key elements that create an environment for audit quality 3

Directive 1.01


MSA-1 MULTI SUBJECT ASSESSMENTS

*FINANCIAL REPORTING AND ASSURANCE PROFESSIONAL COMPETENCE

Objective

To develop competence that is necessary to perform the roles of reporting and assurance professional in accordance with the international and local pronouncements.

Learning Outcome


1 analyze and evaluate separate and consolidated financial statements to be prepared in accordance with the International and local pronouncements from accounting data of common commercial entities

2 explain and advise on the requirements underlying the preparation and presentation of financial statements

3 examine and evaluate financial and non-financial representations of profit and non- profit entities for the purpose of issuing audit report

4 examine and evaluate financial and non-financial representations of profit and non- profit entities for the purpose of issuing other assurance and non-assurance report

5 recognize ethical and professional issues and act appropriately.

***Grid Weightage

Financial accounting and reporting 50-65

Audit, assurance and related services 30-40

Company law and ethics (provisions relating to accounts and audit) 05-10

Total 100

Syllabus Ref.


A Financial accounting and reporting

1 Presentation of Financial Statements (IAS-1, IAS-7 and Companies Act, 2017)

3

2 IFRS 1 First-time Adoption of International Financial Reporting Standards 2

3 IAS 27 Separate Financial Statements 3

4 IFRS 10 Consolidated Financial Statements 3

5 IAS 28 Investments in Associates 3

6 IFRS 11 Joint Arrangements 3

7 IFRS 12 Disclosure of Interest in Other Entities 3

8 IFRS 2 Share-based Payment 3

9 IFRS 13 Fair Value Measurement 3

Note: *Syllabus has been revised in 256th meeting of the Council held on August 7-9, 2014.

Note: **Grid has been revised in 300th meeting of the Council held on July 28, 2018.

Note: *Grid has been revised in 310th meeting of the Council held on February 15, 2019.

Directive 1.01


Syllabus Ref.


10 IFRS 8 Operating Segments 3

11 IFRS 9 Financial Instruments 2

12 IFRS 3 Business Combinations 2

13 IAS 34 Interim Financial Reporting 3

14 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 3

15 IAS 10 Events After the Reporting Date 3

16 IAS 12 Income Taxes 3

17 IAS 16 Property, Plant and Equipment 3

18 IFRS 16 Leases 3

19 IAS 40 Investment Property 3

20 IFRS 15 Revenue From Contracts with Customers 3

21 IAS 19 Employee Benefits 3

22 IAS 21 The Effects of Changes in Foreign Exchange Rates 3

23 IAS 24 Related Party Disclosures 3

24 IFRS 7 Financial Instruments: Disclosures 3

25 IAS 32 Financial Instruments: Presentation 3

26 IAS 33 Earnings per Share 3

27 IAS 36 Impairment of Assets 3

28 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 3

29 IAS 38 Intangible Assets 3

30 IFRIC 10 Interim Financial Reporting and Impairment 3

31 SIC 32 Intangible Assets – Web Site Costs 3

32 Current development and updates relating to IFRS 1

B Audit, assurance and related services

1 Quality control – ISQC 1, ISA 220, quality control framework of ICAP, Quality Assurance Board of ICAP

3

2 Legal, professional and ethical consideration relating to appointment and removal of auditor

3

3 Audit risk 3

4 Audit planning, execution, documentation and conclusion 3

5 Consideration of laws and regulations 3

6 Acceptance and continuance of client 3

Directive 1.01


Syllabus Ref.


7 Subsequent events 3

8 Going Concern 3

9 Fair value measurements and accounting estimates 3

10 Special consideration - Audit of group financial statements (including work of component auditors)

3

11 Work of expert and internal auditor 3

12 Identification of audit issues and advising on relevant audit procedures 3

13 Unmodified audit report 3

14 Modification in audit report 3

15 Emphasis of matter and other matters in audit report 3

16 Reporting consideration on comparative information 3

17 Reporting consideration on other information in document containing financial statements

3

18 Audit report under the Companies Act, 2017 3

19 Current development and updates relating to audit, assurance and related services

1

C Company law and ethics (provisions relating to accounts and audit)

1 Accounts (Section 220 To 239) 3

2 Dividends and Manner and Time of Payment Thereof (Section 240 To 245)

3

3 Audit (Section 246 To 253) 3

4 Code of Corporate Governance (Codes relating to audit and accounts) 3

5 Professional misconduct under the Chartered Accountants Ordinance 1961

3

6 Code of Ethics issued by the Institute of Chartered Accountants of Pakistan

3

Directive 1.01


MSA-2 MULTI SUBJECT ASSESSMENTS

*MANAGEMENT PROFESSIONAL COMPETENCE

Objective

To develop competence that is necessary to perform the role of management professional in accordance with well-recognized management techniques upholding the principles of good governance and ethical standards.

Learning Outcome


1 analyze, evaluate and recommend vision, mission, external and internal analysis, long term objective, operational initiatives, measurements of outcomes and targets

2 analyze, evaluate and recommend financial strategies to complement the business’s strategy

3 evaluate taxation implications of various courses of action and provide tax planning advice

4 review, analyze and evaluate budget, forecasts and projections

5 recognize legal, governance and ethical issues and act and advise appropriately.

**Grid Weightage

Strategic management 40-50

Financial and performance management 35-45

Tax planning 05-15

Management & Administration related Corporate law and Codes of corporate governance and ethics

05-10

Total 100

Syllabus Ref.


A Strategic management

1 Strategic Analysis: Strategic management, organizational goals and objectives, the external business environment, internal factors and strategic capability, analyzing strategic position and performance, levels of strategy in an organization.

3

2 Strategic Choice Strategic choices, generating strategic options, strategic decision-making, evaluating strategic options, international strategies.

3

3 Strategic Implementation: Acquisitions and strategic alliances, aligning organizational structure and strategy, managing change, cost reduction methodologies, evaluating functional strategies, business plans.

3

4 Business Risk Management Business risks, enterprise risk management, risk management responsibilities, stakeholders and risk, risk assessment, risk response.

3

Note: *Syllabus has been revised in 256th meeting of the Council held on August 7-9, 2014. Note: **Grid has been revised in 300th meeting of the Council held on July 28, 2018.

Directive 1.01


Syllabus Ref.


5 Strategic Marketing And Brand Management Understanding market position, developing a marketing strategy, positioning strategies, the marketing mix, databases and e-marketing, brand management, branding and marketing strategy, valuing brands and intangible assets.

3

6 Information Strategy Information technology and strategy, Information for strategic planning and control, Management information systems, The value of information, Evaluating management information and performance data, Using information to develop competitive advantage

3

7 Human Resource Management Strategic human resource management (HRM), the impact of HRM on business strategy, appraisal and performance management, the impact of remuneration and reward packages, HRM and change management.

3

B Financial and performance management

1 Strategic Performance Management Performance management, information for strategic decision making, performance measurement, rewards, behaviour and performance, corporate social responsibility and performance

3

2 Business and Securities Valuation Valuation methods, acquisitions and mergers, unquoted companies and start-ups, valuation of debt.

3

3 Financial Instruments and Financial Markets Equity instruments, equity markets, fixed interest securities, bonds and leasing, bond markets, bond valuation and yields, credit risks, derivatives, derivative markets.

3

4 Financial Structures and Reconstruction Capital structure, Dividend policy, Financial reconstruction, Demergers and disposals, Small and medium company financing.

3

5 Financial Risk Management Financial risks, Interest rate risks, Foreign exchange rate risks, Hedge accounting.

3

6 Treasury and Working Capital Management Treasury management function, Global treasury management, Working capital management.

3

C Tax planning

1 Income Tax for Businesses; Group Relief and Taxation; International Expansion of Businesses restricted to permanent establishment (foreigners investing into Pakistan); Choice of Business Structure, transformation and reorganization; Sales Tax; and Taxation of Employees Remuneration

3

D Management & Administration related Corporate law and Codes of corporate governance and ethics

1 Company Law relating to Management and Administration,

Listed Companies (Code of Corporate Governance) Regulations, 2019

and Public Sector Companies (Corporate Governance) Rules, 2013

3

2 Ethics Ethics and ethical issues, Resolving ethical dilemmas, Ethical safeguards, Ethics and strategy.

3

Directive 1.01

Directive 1.02

EDUCATION DELIVERY SYSTEM

Directive 1.02

C O N T E N T S P a g e #

A REGISTERED ACCOUNTING EDUCATION TUTORS SCHEME – 2014

01 – 15

B REGISTERED ACCOUNTING SCHOOL SYSTEMS SCHEME – 2016

16 – 35

Directive 1.02

Directive 1.02

REGISTERED ACCOUNTING

EDUCATION TUTORS SCHEME – 2014

Directive 1.02

Directive 1.02


EDUCATION TUTORS SCHEME – 2014

Table of Contents Page

1. Registration of Tutors 1

2. Ranking of RAETs 1

3. Application for Registration 1

4. Subsequent Ranking 1

5. Branch of RAETs and change of location* 2

6. Downgrading/Delisting of RAETs 2

7. Key Performance Indicators 3

8. ICAP’s Engagement with RAETs 3

9. Fee and Other Dues 4

10. Effective Date 4

Annexures 5

Application for Registration as Registered Accounting Education Tutors 5

Certificate 7

Benchmark for Self-Evaluation for Registered Accounting Education Tutors 8

Key Performance Indicators 11

Self-Evaluation Report 15

Statement of Key Performance Indicators 15

Directive 1.02

REGISTERED ACCOUNTING EDUCATION TUTORS SCHEME – 2014 1


EDUCATION TUTORS SCHEME – 2014 In exercise of the powers conferred by Section 15 of the Chartered Accountants Ordinance, 1961 read with Bye Law 110 of the Chartered Accountants Bye Laws 1983, the Council of the Institute has approved the following scheme to register and rank the Registered Accounting Education Tutors:

1. REGISTRATION OF TUTORS

The Institute shall enroll those tutors as Registered Accounting Education Tutors who fulfill the conditions specified in this directive.

2. RANKING OF RAETs

a. RAETs shall be ranked in the following manner:

(i) Each RAET shall be ranked as ‘Fellow’, ‘Affiliate’ or ‘Registered’ on the basis of its performance.

(ii) A new RAET shall initially be ranked as ‘Registered’.

(iii) All existing RAETs shall be ranked for the first time as “Affiliate” till November 30, 2015. Thereafter, any time on or before February 28, 2016 a subsequent ranking may be awarded on the basis of their performance during a period of twelve months.

(iv) All existing RAETs shall completely fulfill all the prequalification requirements by May 31, 2015.

b. In case an RAET has more than one campus, each campus shall be ranked separately.

3. APPLICATION FOR REGISTRATION a. Tutors who intend to be registered shall submit an application along with the prescribed induction

fee. The application shall be accompanied by a ‘self-evaluation report’ along with working papers prepared on the basis of benchmarks set forth in this directive.

b. The applicant tutors shall be required to obtain (i) 175 points in aggregate and (ii) minimum points in certain pre-requisite areas as specified in this directive, to be eligible for registration.

c. The ‘self-evaluation report’ shall be accompanied by a Reasonable Assurance Report issued under the ‘International Standards on Assurance Engagement’ by a practicing chartered accountant firm that carries satisfactory QCR rating.

d. In case the assurance report contains a modification, the Institute shall take decision after taking into consideration the impact of such modification.

e. Upon successful completion of all the requirements for registration, a certificate to the effect that the tutor is a Registered Accounting Education Tutor shall be issued by the Institute.

4. SUBSEQUENT RANKING a. **RAETs shall prepare a ‘Statement of KPIs’*, covering a period of last twenty four* months, on the

specified format and shall submit the same to the Institute by February 28 of the following year.

b. The ‘Statement of KPIs’* shall be prepared on the basis of Key Performance Indicators specified in this directive.

*Amended in 264th meeting of the Council held on May 8th and 9th, 2015.

**Amended in 300 th meeting of the Council held on July 28, 2018

Directive 1.02


c. The ‘Statement of KPIs’* shall be accompanied by a Reasonable Assurance Report issued under the

‘International Standards on Assurance Engagement’ by a practicing chartered accountant firm that

carries satisfactory QCR rating.

d. In case the assurance report contains a modification, the Institute shall take decision after taking

into consideration the impact of such modification.

e. On the basis of the ‘Statement of KPIs’* subject to any adjustment considered appropriate by the

Institute in case of modified assurance report, the RAETs shall be ranked as follows:

Status KPI Achievement

Fellow 70% and above points

Affiliate 50% to 69% points

Registered Below 50%

f. A certificate to the effect that the tutor is a Fellow or Affiliate or Registered Accounting Education

Tutor shall be issued by the Institute.

g. In order to get better status, an RAET may opt to submit the above mentioned statement earlier

than the due date, covering at least period of last twelve months, accompanied by a Reasonable

Assurance Report issued by a practicing chartered accountant firm.*

5. BRANCH OF RAETs AND CHANGE OF LOCATION*

a. For establishing a branch of RAET, the clause 3 of this Directive shall be followed as is the case for

registering a new RAET.

b. For change in location of the existing RAET, application shall be submitted accompanied by a ‘self-

evaluation report’ relating to location and facility along with working papers prepared on the basis

of benchmarks set forth in this directive.

c. The ‘self-evaluation report’ for change in location shall be accompanied by a Reasonable Assurance

Report issued under the ‘International Standards on Assurance Engagement’ by a practicing

chartered accountant firm.

6. DOWNGRADING/DELISTING OF RAET** a. RAET shall be given notice of downgrading to ‘Registered’ status if it fails to submit ‘Statement of

KPIs’ by June 30 of the calendar year following the reported twenty four months.

b. RAET shall be given notice of delisting if it fails to meet the pre-requisites under this directive at any

time or fails to pay the prescribed annual renewal fee by June 30 of the calendar year following the

due date.

c. If RAET prefers not to exercise its right to appeal under this regulation, the RAET shall be

downgraded or delisted after the expiry of appeal period. Once delisted or downgraded the RAET

may apply for up-gradation or re-registration after December 31 of the calendar year in which the

RAET has been delisted or downgraded.

d. RAET which has been served notice of downgrading or delisting shall have a right to appeal to

ETCOM for review of decision of downgrading or delisting within 30 days from the date said notice

is communicated to the concerned RAET.

e. The appellant RAET shall not be downgraded or delisted, as the case may be, till the decision of

ETCOM on the appeal of the RAET.


**Amended in 277th meeting of the Council held on July 29th and 30th, 2016.

Directive 1.02


7. KEY PERFORMANCE INDICATORS

The following may be the broader parameters for the development of Key Performance Indicators:

(i) Performance of students in CA examinations

(ii) Quality of faculty

(iii) Infrastructure and facilities

(iv) Teaching environment

(v) Focus of RAET on promotion of CA qualification and allocation of exclusive resources for CA stream

(vi) Payment of fee and dues on time

8. ICAP’S ENGAGEMENT WITH RAETs There shall be a closer coordination and working relationship between ICAP and RAETs. The level of engagement may vary according to the rank of individual RAET as described hereunder:

a. With Fellows

(i) Prominent exposure on website, at front offices and in ICAP’s events

(ii) Mention of names of RAETs in advertisements and exhibitions

(iii) Closer relationship and feedback facility in respect of examinations and results including sharing of statistics regarding performance of unsuccessful students

(iv) Participation in Exam Review Committee meetings, which may be formed by the Council

(v) Consultation on policies regarding education, delivery of education and examinations

(vi) Participation in annual coordination meeting

(vii) Priority in attending ‘Train the trainers program’

b. With affiliates

(i) Moderate level exposure on website, at front offices and in ICAP’s events

(ii) Closer relationship and feedback facility in respect of examinations and results including

sharing of statistics regarding performance of unsuccessful students

(iii) Consultation on policies regarding education, delivery of education and examinations

(iv) Participation in annual coordination meeting

(v) Participation in Exam Review Committee meetings as observer, which may be formed by the

Council

(vi) Limited involvement in ‘Train the trainers program’

c. With Registered

(i) Listing on website and mention of names at front offices

(ii) Feedback facility in respect of examinations and results including sharing of statistics

regarding performance of unsuccessful students

(iii) Participation in annual coordination meeting

9. FEE AND OTHER DUES a. The fee and other dues including registration and annual renewal shall be as may be

specified by the Council.

b. The annual renewal fee in respect of each calendar year shall be payable in advance by January

31 of that calendar year.

c. The sponsor(s) of an RAET shall be jointly and severally responsible for the payment of fee and

Directive 1.02


other dues within the time specified under this scheme.

d. An undertaking in this respect shall be filed by the sponsor(s) at the time of applying for

registration of RAET or in case of existing RAETs, within six months from the effective date of this

scheme.

10. EFFECTIVE DATE This directive shall become effective on December 1, 2014.

Directive 1.02


Annexures

APPLICATION FOR REGISTRATION AS REGISTERED ACCOUNTING EDUCATION TUTORS

SPONSOR(s)

Name

Membership (if any) Membership No

Present Occupation

Address (Office) Tel No. Fax No. E-mail

Address (Residence)

Tel No. Fax No. E-mail

PROPOSED RAET

Proposed Name

Address Tel No. Fax No. E-mail

Website address:

(Proposed name of RAET should not contain the words “Chartered Accountant” and “Professional Accountant”).

Directive 1.02


PRINCIPAL

Name

Membership (if any) Membership No

ASSURANCE REPORT

Firm of Chartered Accountants engaged for assurance

INDUCTION FEE

Cross Cheque / Pay Order / Bank Draft for Rs. Dated

UNDERTAKING a. We apply for registration of the above named education facility for the conduct of classes as per

ICAP prescribed syllabi, rules, regulations and instructions which have been read and understood

by me and the management and administrative staff of my institution. b. We undertake to demonstrate to the satisfaction of ICAP that the operation/activities of my/ our

education institution shall be pursued with total commitment to the highest standards of teaching

directed towards success of students in ICAP examinations and the highest professional and

ethical standards of the CA profession will be maintained. c. We undertake that all fees and dues payable to ICAP will be paid timely and we, jointly and

severely, hold ourselves responsible for the payment of fee and other dues. d. We shall abide by the scheme and policies governing the RAETs issued by the ICAP from time to

time.

Date:

Place: (Signature of the Sponsor)

FOR INSTITUTE USE ONLY

File No.

Checked by Date

Approved by Date

Certificate issued No. Date

Directive 1.02


No. 0000

The Institute of Chartered Accountants of Pakistan

Established under the Chartered Accountants Ordinance, 1961 (X of 1961)

This is hereby certified that

ABC Karachi

is a

FELLOW

Registered Accounting Education Tutor

of The Institute of Chartered Accountants of Pakistan Director Education, Training and CPD September XX, 2014

Directive 1.02


BENCHMARK FOR SELF-EVALUATION FOR REGISTERED ACCOUNTING EDUCATION TUTORS

S. Particulars Maximum Scale for achievable points Mandatory

No. Points minimum points

1 Sponsor/Principal

1.1 Qualification of sponsor or 10 FCA/PhD (10 points) 4

Principal ACA (6points)

(Select any one for evaluation) FCMA (5 points)

ACMA (4 points)

M Phil/MS (4 points)

2 Facilities

2.1 Classroom furnished with 80 Each class room (10 marks) 40

minimum seating capacity of 20

students (on the basis of area of

10 sq feet per student)

2.2 Planned Maximum class size is 60 students (additional 10% in 80 80

special circumstances)

2.3 Library/ Reading Room 10 Accommodates 10% of planned 4

students’ population (5 points)

Quality of relevant books

(5 points)

(Proportional evaluation)

Evaluated through students’

feedback

2.4 Computer facilities 20 Accommodates 10% of planned 10


Quality of systems available for

use (10 points)



feedback

2.5 Building 15 Constructed and utilized in 0

accordance with the applicable

rules/regulations/byelaws

2.6 Overall outlook and facilities 30 Approach to RAET (5), overall 20

cleanliness (5) reception (5),

Air-conditioning (5), sufficient

washrooms (5), sufficient

common rooms (5), play area (5),

security (5)



feedback

Directive 1.02


3 Faculty

3.1 Faculty qualification 50 Category (a) 10 points per 20

a. PhDs/ Fellow Chartered

person

Accountants Category (b) 8 points per

b. Associate Chartered

person*

Accountants and Category (c) 6 points per person

members of professional * one person is compulsory

bodies recognized by ICAP

The points are only for faculty

c. Faculty having M Phil or

members employed on full time

16 + years of Education,

basis, in addition to principal.

CAF or equivalent

50% points will be awarded for

qualification with 3 year

post training experience part time faculty members.**

3.2 Faculty profile – Chartered 50 5 points per person who is CPD 10

Accountants or members of compliant

professional bodies recognized

by ICAP

3.3 Student Teacher Ratio 40 20:1 25

(This benchmark would not (A part time teacher will have

be considered for evaluation if 60% weightage)**

there are less than 20 students

enrolled)

3.4 Trainings received by teachers 20 1 point for each training of 5

during last 12 months minimum 4 hours per person

4 Quality Control Policies and

Procedures

4.1 Faculty evaluation – peers and 20 Documented policy/Evaluation 5

students form

(Two evaluations in a subject for

each teacher)

4.2 System to assess students’ 30 Documented policy/copies of 10

progress and provide them tests performed

feedback

4.3 Academic planning/Course 40 Documented policy/ course 12

Completion Plans planners (4 points per subject)

TOTAL 495

Explanatory Notes: 1. Guidance on terms used:

a. “Quality of relevant books”, “Quality of systems” and “Overall outlook and facilities” shall

be determined by students’ feedback on the following scale:

Quality judged Bad Below Average Average Above average Good Excellent

Points 0 1 2 3 4 5

Directive 1.02


b. “Professional bodies recognized by ICAP” means the professional bodies whose members are

recognized under the bye-laws for full or part exemptions from examinations.

c. “Planned students’ population” means seating capacity of furnished class rooms.

d. “Students” means students enrolled for chartered accountancy qualification.

2. Points will be prorated where the actual level/standing against a benchmark is less than the

maximum.

Example: Benchmark: Student Teacher Ratio Maximum points 40 Scale 20:1 Achieved 400 enrolled students

16 teachers Ratio 25:1

Points (20/25 * 40) 32 3. Qualitative evaluations must be supported by a brief description on the subject matter.

*****

Directive 1.02


KEY PERFORMANCE INDICATORS

S. No.

Indicators KPI Measure Max.

Points

1 Infrastructure and facilities

1.1 Qualification of sponsor or principal FCA/PhD (10 points) 10

ACA (6 points)

FCMA (5 points)

ACMA (4 points)


1.2 Library/ Reading Room Accommodates 10% of planned 10


Quality of books (5 points)

Evaluated through students’ feedback to

be incorporated in Evaluation given at

para 3.1


1.3 Computer facilities Accommodates 10% of planned 20


Quality of systems available for use

(10 points)



para 3.1


1.4 Classroom furnished with minimum seating Each class room (10 marks) 80

capacity of 20 students

(the area on the basis of 10 sq feet per student

basis)

1.5 Maximum class size is 60 students 80

(additional 10% is in special circumstances)

1.6 Building Constructed and utilized in accordance 15

with the applicable rules/regulations/

bye-laws

1.7 Overall outlook and facilities Approach to RAET (5), overall cleanliness 30

(5), reception (5), Air-conditioning (5),

sufficient washrooms (5), sufficient

common rooms (5), play area (5), security

(5)



para 3.1 (Proportional evaluation)

1.8 Faculty qualification Category (a) 10 points per person 100

a. PhDs/ Fellow Chartered Accountants Category (b) 8 points per person*

b. Associate Chartered Accountants Category (c) 6 points per person

and members of professional bodies * one person is compulsory

recognized by ICAP,

Directive 1.02


c. Faculty having M Phil or 16 + years of The points are for faculty members

Education, CAF or equivalent qualification employed on full time basis in addition

with 3 year post training experience to principal. 50% points will be awarded

to part time faculty members.**

1.9 Faculty profile – Chartered Accountants or 5 points per person who is CPD 50

members of professional bodies recognized compliant

by ICAP

1.10 Student Teacher Ratio 20:1 40

(This benchmark would not be considered for (A part time teacher will have 60%

evaluation if there are less than 20 students weightage)**

enrolled)

1.11 Trainings received by teachers during last 12 1 point for each training of minimum 4 20

months hours per person

1.12 Faculty evaluation policy – peers and students Standard of documented policy or 20

evaluation forms

(Two Evaluations in a subject for each

teacher, 2 points for each teacher)

1.13 System to assess students’ progress and Standard of documented policy/copies 30

provide them feedback of tests performed

(2 points per teacher per subject)

1.14 Academic planning/Course Completion Plans Standard of documented policy/course 40

planners

(4 points per subject)

2 Promotion of CA Program

2.1 Career Counselor desk well managed. 1 desk in a year (10 points) 20

Prominent, suitable for one-to-one discussion,

attractive design, trained, experienced staff

and promotional material available.

2.2 Visits to school and colleges where at least Each school/college (5 points) 40

25 students are counseled exclusively for CA

qualification.

2.3 Participation in education expo where 1 expo (10 points) 20

minimum one desk is dedicated for CA

qualification

2.4 Scholarship for bright and needy students 100% fee waiver for 1% of the total 60

students (6 points)

(Proportional Evaluation)

3 Faculty

3.1 Faculty performance evaluated by principal or More than 90% faculty rated “Good” (40 40

academic committee of RAET. points)

(There can be different grading system in More than 90% faculty rated

RAETs. The rating which corresponds to “Satisfactory” (20 points)

above-normal performance would be treated The evaluation must be based on

as “Good” and normal performance would be students and peer evaluation arranged

treated as “Satisfactory”) for each faculty member twice in the

course


Directive 1.02


3.2 Faculty’s contribution in “Pakistan Accountant” 4 points for one contribution 40 or any other reputable journal.

(The journals other than Pakistan Accountant should be acceptable to principal or academic committee of RAET. The contribution may not necessarily be of technical nature)

3.3 Faculty contribution in ICAP’s syllabus 10 points for each subject 40 review assignments. Each RAET is expected to provide a syllabus review report on the subjects selected by RAET before the commencement of classes of the selected subjects.

3.4 Faculty contribution in study packs review 20 points for each subject 40 assignments. Each RAET is expected to provide study material review report on the subjects selected by RAET before the commencement of classes of the selected subjects.

4 Teaching

4.1 Periodic Tests given to students. 4 tests per subject in a session (6 points) 60 (The test should be documented and verified (Proportional Evaluation) by the principal or academic committee of RAET)

4.2 Test feedback provided to students by way of 4 tests per subject in a session (6 points) 60 marking, evaluator’s comment and model (Proportional evaluation) answers.

5 Performance of students

*5.1 AFC (Four subjects) Performance of enrolled students in ICAP exams (Enrolled Students are those who are other than those who dropped out after completing less than 40% classes and were duly reported to the Institute)

For each subject First 50 points - Percentage of passed students over enrolled students is equal to overall result of the Institute (Proportionate Evaluation). Remaining 50 points – Percentage of passed students over enrolled students exceeding the overall result of the Institute (Proportionate Evaluation). This additional 50 points will be computed proportionally to the results exceeding the Institute’s overall result. In case of 100% result of the Institute the proportionate evaluation would be done for full 100 points.**

400

*5.2 CAF (Nine subjects) Performance of enrolled students in ICAP exams (Enrolled Students are those who are other than those who dropped out after completing less than 40% classes and were duly reported to the Institute)

For each subject First 50 points - Percentage of passed students over enrolled students is equal to overall result of the Institute (Proportionate Evaluation). Remaining 50 points – Percentage of passed students over enrolled students exceeding the overall result of the

900

*Amended in 322nd meeting of the Council held on December 13-14, 2019.

Directive 1.02


Institute (Proportionate Evaluation). This additional 50 points will be computed proportionally to the results exceeding the Institute’s overall result. In case of 100% result of the Institute the proportionate evaluation would be done for full 100 points.**

6 Fee payment

6.1 Annual renewal fee payable in advance On time 30 (Reduce 2 point per day of delayed payment)

Total 2295

Explanatory Notes: 1. Guidance on terms used:

a. “Quality of relevant books”, “Quality of systems” and “Overall outlook and facilities” shall be determined by students feedback on the following scale:

Quality judged Bad Below Average Average Above average Good Excellent

Points 0 1 2 3 4 5

b. “Professional bodies recognized by ICAP” means the professional bodies whose members are recognized under the bye-laws for full or part exemptions from examinations.

c. “Planned students’ population” means seating capacity of furnished class rooms.


2. Points will be prorated where the performance achieved against a benchmark is less than the maximum.

**Example:

KPI: Performance of students in AFC- Functional English

Maximum points 100

KPI measure Percentage of pass students

ICAP overall result 6,000 students passed out of 12,500 (48%)

Achieved by RAET 67 student pass out of 120 in Functional English

67/120 =55.83% overall pass result

Pass result is 55.83%-48%=7.83% greater than overall ICAP result Points gained

First 50 points Result equal to or more than 48% 50

Remaining 50 points Results in excess of 48%

(7.83/100-48)X50 7.52

Total points 58 3. Qualitative evaluations must be supported by a brief description on the subject matter.

*****

Directive 1.02


SELF-EVALUATION REPORT

AS AT_____________________________

NAME OF APPLICANT TUTOR

Evaluation based on scale Maximum Points Mandatory Working

S. No. Particulars minimum paper

for achievable points Points obtained

points reference

Submitted by

(Signature and name of authorized person) Date and place

*****

STATEMENT OF KEY PERFORMANCE INDICATORS*

FOR THE PERIOD* _____________________________

NAME OF RAET

Maximum Points

Working

S. No. Indicators KPI Measure paper

Points obtained

reference

Submitted by

(Signature and name of authorized person) Date and place

***** (244th Council meeting held on April 22-23, 2013)


** Amended in 273rd meeting of the Council held on March 17th and 18th, 2016

Directive 1.02



SCHOOL SYSTEMS SCHEME – 2016

Directive 1.02

Directive 1.02

REGISTERED ACCOUNTING SCHOOL SYSTEMS SCHEME – 2016 18

REGISTERED ACCOUNTING SCHOOL SYSTEMS SCHEME – 2016

Table of contents Page

1. Preamble 19

2. Registration of School Systems 19

3. Conditions for Registration 19

4. The Process of Registration 20

5. Periodic Reporting 21

6. Branch of RASSs and change of location 21

7. Change in ownership of RASS 21

8. Delisting of RASS 21

9. Key Performance Indicators 21

10. ICAP’s Engagement with RASSs 22

11. Fee and Other Dues 22

12. Oversight by the Institute 22


Annexures

Application for Registration as Registered Accounting School System 23

Certificate 25

Benchmark for Self-Evaluation for Registered Accounting School Systems 26

Key Performance Indicators 30

Self-Evaluation Report 35

Statement of Key Performance Indicators 35

Directive 1.02


B – Directive 1.02


SCHOOL SYSTEMS SCHEME – 2016

In exercise of the powers conferred by Section 15 of the Chartered Accountants Ordinance, 1961 read with Bye Law 110 of the Chartered Accountants Bye Laws 1983, the Council of the Institute has approved the following scheme to register the Accounting School Systems:

1. PREAMBLE

The CA qualification comprises of both the theoretical knowledge and the practical experience. The academic support is extended to the students through different channels.

These regulations provide for the registration of the Higher Secondary Schools offering HSC qualification / A Levels education/any qualification equivalent to twelve years of education and will be called “Registered Accounting School Systems Scheme 2016” hereinafter called (the scheme). The School Systems registered under these regulations will be called “Registered Accounting School Systems (RASSs) and will function as CA education providers.

This scheme targets the potential aspirants through the broader geographical presence of these school systems.

2. REGISTRATION OF SCHOOL SYSTEMS

The Institute shall enroll those School Systems as Registered Accounting School Systems that fulfill the conditions specified in this directive.

3. CONDITIONS FOR REGISTRATION

a. The school system must have its presence in at least ten (10) cities out of which at least five (5) cities must be those where ICAP has no Registered Accounting Education Tutor (RAET).

b. The school systems will provide tuition for at least AFC and CAF level examinations including presentation and communication skills courses.

c. The Registered Accounting School Systems will preferably follow normal morning timings.

d. Every campus offering CA courses of the same School System will be required to get approval of the Institute on individual basis.

e. The RASS campuses offering CA courses will be purpose built. In areas where no RAET is present, the Institute may, after evaluating the campus, allow tuition of students in the existing RASS campus.

f. The Institute may make a commitment not to allow any other RASS to have its campus in the selected area for a period of three (3) years. In consideration of such exclusivity, the Institute will require compulsory offering of CA courses in particular cities or regions, identified by the Institute, where there is no RAET currently.

g. The RASS shall make a commitment that it will not offer any other accountancy qualification in its campuses dedicated to CA qualification.

h. A school system once declared RASS shall not be registered as RAET by the Institute.

i. The policy directives issued by the Institute are binding on all RASSs and every RASS must comply with and operate in accordance with the policy directive.

Directive 1.02


4. THE PROCESS OF REGISTRATION

a. The School Systems shall, at the time of registration, submit a comprehensive proposal inclusive of the following particulars:

I. Operational Feasibility

(i) Executive Summary of the project

Goals of implementing CA Pakistan’s curriculum and the challenges therein

Justification of the proposal in the context of market needs and social benefits

(ii) Background of the School System/Network and the Management structure

(iii) Anticipated financial health of the proposal supported by an analytical-descriptive plan for source(s) of income and expenditure.

(iv) Location(s) and reason of selection of area/campus

(v) Program of studies

(vi) General policy towards admissions, drop out and re-enrolment

(viii) Performance measurement policy for students and faculty

(ix) Marketing and communication initiatives for the promotion of CA Pakistan

(x) Additional information if any.

II. Self-Evaluation Report

(i) Qualification and Experience of the Sponsor/Principal/Head of the Campus

(ii) Assessment of Campus’s resources and facilities against Institute’s requirements, the resources and facilities being the infrastructure, administration, teaching staff, spacious class rooms, furniture and fixtures, computer labs and library equipped with curriculum supporting resources

(iii) Details of faculty i.e. qualifications and selection criteria

(iv) A well-designed approach for teachers’ professional development

(v) Embedded quality assurance processes i.e. academic supervision and level of administrative and technical support for quality assurance.

b. School Systems that intend to be registered shall submit an application along with the prescribed induction fee. The application shall be accompanied by the proposal along with working papers prepared on the basis of benchmarks set forth in this directive.

c. The applicant School Systems shall be required to obtain (i)275 points in aggregate and (ii) minimum points in certain pre-requisite areas as specified in this directive, to be eligible for registration.

d. The ‘self-evaluation report’ of campuses offering CA education shall be accompanied by a Reasonable Assurance Report issued under the ‘International Standards on Assurance Engagement’ by a practicing chartered accountant firm that carries satisfactory QCR rating.

e. In case the assurance report contains a modification, the Institute shall take decision after taking into consideration the impact of such modification.

f. Upon successful completion of all the requirements for registration, the Institute shall consider the application as it may deem fit and proper for issuing a certificate to the effect that the School System is a Registered Accounting School System

g. The Institute, upon satisfying itself on the applicant, shall issue a certificate to the effect that the School System is a Registered Accounting School System.

Directive 1.02


5. PERIODIC REPORTING

a. RASSs shall prepare a ‘Statement of KPIs’, covering a period of last two calendar years, on the specified format and shall submit the same to the Institute by February 28 of the year following the reported calendar years. The first such statement would cover the period of the calendar year in which RASS is given the said status. The same shall be submitted to the Institute by February 28 of the following year.

b. The ‘Statement of KPIs’ shall be prepared on the basis of Key Performance Indicators specified in this directive. The ‘Statement of KPIs’ shall be accompanied by a Reasonable Assurance Report issued under the ‘International Standards on Assurance Engagement’ by a practicing chartered accountant firm that carries satisfactory QCR rating.

c. In case the assurance report contains a modification, the Institute shall take decision after

taking into consideration the impact of such modification.

6. BRANCH OF RASSs AND CHANGE OF LOCATION

For establishing a new campus dedicated to CA courses or change of location of any approved campus, the RASS will be required to submit the Self Evaluation Report for such new campus or such new location of approved campus, accompanied by a Reasonable Assurance Report issued under the ‘International Standards on Assurance Engagement’ by a practicing chartered accountant firm that carries satisfactory QCR rating.

7. CHANGE IN OWNERSHIP OF RASS

a. The Principal or Sponsor having intention to change the ownership or partnership pattern of RASS shall apply in writing to the Institute, at least 45 days before such change

b. The Institute, after satisfying itself to the person involved in the new arrangement, may grant approval of such change.

8. DELISTING OF RASS

(i) RASS shall be given a direction to comply with or remove the deficiency within a given period, which will not be more than four months, if it fails to:

a. submit ‘Statement of KPIs’ by due date;

b. meet the pre-requisites under this directive at any time; or

c. pay the prescribed annual renewal fee by due date .

(ii) If RASS fails to comply with the direction within a given period, it will be given a notice of its delisting.

(ii) If said RASS prefers not to exercise its right to appeal under this regulation, the RASS shall be delisted after expiry of appeal period. Once delisted, the RASS may apply for re-registration after December 31 of the calendar year in which the RASS has been delisted.

(iii) The RASS which has been served notice of its delisting shall have a right to appeal to ETCOM for review of decision of delisting within 30 days from the date the said notice is communicated to the concerned RASS.

(iv) The appellant RASS shall not be delisted till the decision of ETCOM on the appeal of the RASS.

9. KEY PERFORMANCE INDICATORS

The following may be the broader parameters for the development of Key Performance Indicators:

(i) Performance of students in CA examinations

(ii) Quality of faculty

Directive 1.02


(iii) Infrastructure and facilities

(iv) Teaching environment

(v) Focus of RASS on promotion of CA qualification and allocation of exclusive resources for CA stream

(vi) Payment of fee and dues on time

(vii) Code of conduct for students in the premises

10. ICAP’S ENGAGEMENT WITH RASSs

There shall be close coordination and working relationship between ICAP and RASSs. The level of engagement may be as follows:

(i) Prominent exposure on website, at front offices and in ICAP’s events

(ii) Mention of names of RASSs in advertisements and exhibitions

(iii) Feedback facility in respect of examinations and results including sharing of statistics regarding performance of unsuccessful students

(iv) Participation in Exam Review Committee meetings, which may be formed by the Council

(v) Consultation on policies regarding education, delivery of education and examinations

(vi) Participation in annual coordination meeting

(vii) Priority in attending ‘Train the trainers program’

11. FEE AND OTHER DUES

(i) The fee and other dues including registration and annual renewal shall be equivalent to the same applicable on RAET.

(ii) The annual renewal fee in respect of each calendar year shall be payable in advance by January 31 of that calendar year.

(iii) The sponsor(s) of an RASS shall be jointly and severally responsible for the payment of fee and other dues within the time specified under this scheme.

(vi) An undertaking in this respect shall be filed by the sponsor(s) at the time of applying for registration of RASS or in case of existing RASSs, within six months from the effective date of this scheme.

12. OVERSIGHT BY THE INSTITUTE

a. The representative(s) of ICAP may carry out surprise or planned visit(s) to the CA-dedicated campus(es) of Registered Accounting School System at own discretion or on the complaint about significant non-compliance with the requirements of the registration.

b. The visit(s), if any, will be for the purpose of assuring whether RASS is in compliance with the requirements of this directive or any other such regulation issued by the Institute from time to time. The representatives will be allowed to meet the students attending the courses and to attend any part of the course, if needed.

c. After each visit a draft Visit Report will be shared with the RASS which will have 15 days to comment and respond. A final report will be submitted to ETCOM after considering the comments and response of RASS.

13. EFFECTIVE DATE

This directive shall become effective on November 1, 2016.

Directive 1.02


Annexures

APPLICATION FOR REGISTRATION AS REGISTERED ACCOUNTING SCHOOL SYSTEM

SPONSOR(s) Name ___________________________________________________________________________ Membership (if any) _________________ Membership No _____________________________________ Present Occupation ________________________________________________________________ Address (Office) ___________________________________________________________________ _________________________________________________________________________________ Tel No. ______________ Fax No. ______________ E-mail __________________________________ Address (Residence) ________________________________________________________________ _________________________________________________________________________________ Tel No. ______________ Fax No. ______________ E-mail __________________________________

PROPOSED RASS Proposed Name ___________________________________________________________________ Address __________________________________________________________________________ _________________________________________________________________________________ Tel No. ______________ Fax No. ______________ E-mail __________________________________ Website Address ___________________________________________________________________ (Proposed name of RASS should not contain the words “Chartered Accountant” and “Professional Accountant”)

Directive 1.02


PRINCIPAL Name ___________________________________________________________________________ Membership (if any) _________________ Membership No _____________________________________

ASSURANCE REPORT Firm of Chartered Accountants engaged for assurance ____________________________________

INDUCTION FEE

Cross Cheque / Pay Order / Bank Draft for Rs. _____________ Dated _________________________

UNDERTAKING

a. We apply for registration of the above named education facility for the conduct of classes as per ICAP prescribed syllabi, rules, regulations and instructions which have been read and understood by me and the management and administrative staff of my institution.

b. We undertake to demonstrate to the satisfaction of ICAP that the operation/activities of my/ our education institution shall be pursued with total commitment to the highest standards of teaching directed towards success of students in ICAP examinations and the highest professional and ethical standards of the CA profession will be maintained.

c. We undertake that all fees and dues payable to ICAP will be paid timely and we, jointly and severely, hold ourselves responsible for the payment of fee and other dues.

d. We shall abide by the scheme and policies governing the RASSs issued by the ICAP from time to time.

Date _____________________ _________________________ (Signature of the Supervisor) Place ____________________


File No.

Checked by ___________________________________ Date _______________________________ Approved by ___________________________________ Date ______________________________ Certificate issued _______________ No. ____________ Date ______________________________

Directive 1.02


No. 0000

The Institute of Chartered Accountants of Pakistan Established under the Chartered Accountants Ordinance, 1961 (X of 1961)


ABC Karachi

is a

Registered Accounting School System

of The Institute of Chartered Accountants of Pakistan Director Education, Training and CPD September XX, 2016

Directive 1.02


BENCHMARK FOR SELF-EVALUATION FOR REGISTERED ACCOUNTING SCHOOL SYSTEMS

S.No. Particulars Maximum

Points Scale for achievable points

Mandatory minimum points

1. Sponsor/Principal

1.1 Qualification of Sponsor or Principal (Select any one for evaluation)

10 FCA/PhD (10 points) ACA (6points) FCMA (5 points) ACMA (4 points) M Phil/MS (4 points)

4

1.2 Profile of the Sponsor or Principal 10 Proof of minimum 10 years of teaching and/or professional experience

5

1.3 Engagement of Sponsor or Principal with RASS

05 Whether engaged full time or part time.

In case of part timer, consent from the employer to act as such, incase employed elsewhere.

5

2. Physical Facilities

2.1 Building 15 Constructed and utilized in

accordance with the applicable

rules/regulations/byelaws

0

2.2 Classroom furnished with minimum seating capacity of 20 students (on the basis of area of 10 sq. feet per student)

80 Each class room (10 marks) 40

2.3 Planned Maximum class size is 60 students (additional 10% allowed in special circumstances)

80 80

2.4 Library/ Reading Room 30 Accommodates 10% of planned students’ population (5 points)

At least 500 books in the library (5 points)

Quality of relevant books (5 points)


Evaluated through students’ Feedback

Subscription to at least 5 journals of international repute and at least two newspapers (one Urdu and one English) is mandatory. Access to online journals and newspapers also to be provided (7 points)

Presence of librarian (3 points)

15

Directive 1.02





2.5 Computer facilities 30 Accommodates 10% of planned students’ population (10 points)

Quality of systems available for use (10 points)


Evaluated through students’ feedback

Sufficient number of computer systems available and does every student use it on individual basis. (10 points)

15

2.6 Overall outlook and facilities 30 Approach to RASS (5), overall cleanliness (5) reception (5), Air-conditioning (5), sufficient washrooms (5), sufficient common rooms (5), play area (5), security (5) (Proportional evaluation)


20

3 Faculty

3.1 Faculty qualification 50 20

a. PhDs/ Fellow Chartered Accountants

Category (a) 10 points per person

b. Associate Chartered Accountants and members of professional bodies recognized by ICAP

Category (b) 8 points per person*

c. Faculty having M Phil or 16+ years of Education, CAF or equivalent qualification with 3 year post training Experience

Category (c) 6 points per person

* one person is compulsory

The points are only for faculty members employed on full time basis, in addition to Principal. 50% points will be awarded for part time faculty members.

CAF or equivalent qualification with 3 years post training experience is the minimum qualification for faculty.

Directive 1.02





3.2 Faculty profile – Chartered Accountants or members of professional bodies recognized by ICAP

50 5 points per person who is CPD compliant

10

3.3 Engagement of Faculty 10 Consent from the employers to act as such, if Part-time faculty members employed elsewhere

10

3.4 Other Staff 10 Total number of non-teaching, administrative and supporting staff, their designations and qualifications. Copies of service rules to be provided.

Evaluation through observation of sufficiency)

5

4. Teachers’ professional development

4.1 Trainings received by teachers during last 12 months

20 1 point for each training of minimum 4 hours per person

5

5. Quality Control Policies and Procedures

5.1 Faculty evaluation – peers and students

20 Documented policy/Evaluation form

(Two evaluations in a subject for each teacher)

5

5.2 System to assess students’ progress and provide them feedback

30 Documented policy/ regulations of examinations

copies of tests performed

10

5.3 Academic planning/Course Completion Plans

40 Documented policy/ course planners (4 points per subject)

12

5.4 Code of conduct for students and ethical requirements

15 Documented code of conduct for students including ethical requirements and its orientation and dissemination

08

TOTAL 535

Directive 1.02


Explanatory Notes:

1. Guidance on terms used:

a. “Quality of relevant books”, “Quality of systems” and “Overall outlook and facilities” shall be

determined by students’ feedback on the following scale:

Quality judged

Bad Below Average

Average Above Average Good Excellent

Points 0 1 2 3 4 5


recognized under the bye-laws for full or part exemptions from examinations c. “Planned students’ population” means seating capacity of furnished class rooms d. “Students” means students enrolled for chartered accountancy qualification.

3. Qualitative evaluations must be supported by a brief description on the subject matter. **************************************************************************************************************

Directive 1.02


KEY PERFORMANCE INDICATORS S. No. Indicators KPI Measure Max Points

1 Infrastructure and facilities

1.1 Qualification of sponsor or principal

FCA/PhD (10 points)

ACA (6 points)

FCMA (5 points)

ACMA (4 points)


10

1.2 Library/ Reading Room Accommodates 10% of planned students’ population (5 points)

At least 500 books in the library (5 points)

Quality of relevant books (5 points) (Proportional evaluation)

Evaluated through students’ Feedback

Subscription to at least 5 journals of international repute and at least two newspapers (one Urdu and one English) is mandatory. Access to online journals and newspapers also to be provided (7 points)

Presence of librarian (3 points)

30

1.3 Computer facilities Accommodates 10% of planned students’ population (10 points)

Quality of systems available for use (10 points)



Sufficient number of computer systems available and does every student use it on individual basis. (10 points)

30

1.4 Classroom furnished with minimum seating capacity of 20 students (the area on the basis of 10 sq feet per student basis)

Each class room (10 marks) 80

1.5 Maximum class size is 60 students(additional 10% in special circumstances)

80

1.6 Building Constructed and utilized in accordance with the applicable rules/regulations/bye-laws

15

1.7 Overall outlook and facilities Approach to RASS (5), overall cleanliness (5), reception (5), Air-conditioning (5), sufficient washrooms (5), sufficient common rooms (5), play area (5), security (5)

Evaluated through students’ feedback to be incorporated in Evaluation given at para 3.1


30

Directive 1.02


S. No. Indicators KPI Measure Max Points

1.8 Faculty qualification

a. PhDs/ Fellow Chartered Accountants

Category (a) 10 points per person 100

b. Associate Chartered Accountants and members of professional bodies recognized by ICAP

Category (b) 8 points per person*

c. Faculty having M Phil or 16 + years of Education, CAF or equivalent qualification with 3 year post training experience

Category (C) 6 points per person* one person is compulsory

The points are for faculty members employed on full time basis in addition to principal. 50%points will be awarded to part time faculty members

1.9 Faculty profile – Chartered Accountants or members of professional bodies recognized by ICAP

5 points per person who is CPD compliant 50

1.10 Student Teacher Ratio

(This benchmark would not be considered for evaluation if there are less than 20 students enrolled)

20:1

(A part time teacher will have 60% weightage)

40

1.11 Trainings received by teachers during reporting period

1 point for each training of minimum 4 hours per person

20

1.12 Faculty evaluation policy – peers and students

Standard of documented policy or evaluation forms

(Two Evaluations in a subject for each teacher, 2 points for each teacher)

20

1.13 System to assess students’ progress and provide them feedback

Standard of documented policy/copies of tests performed

(2 points per teacher per subject)

30

1.14

Academic planning/Course Completion Plans

Standard of documented policy/course planners

(4 points per subject)

40

1.15 Code of conduct for students and ethical requirements

Documented code of conduct for students including ethical requirements and its orientation and dissemination.

15

2 Promotion of CA Program

2.1 Career Counselor desk well managed. Prominent, suitable for one-to-one discussion, attractive design, trained, experienced staff and promotional material available.

1 desk in a year (10 points) 20

2.2 Visits to school and colleges where at least 25 students are counseled exclusively for CA qualification.

Each school/college (5 points) 40

Directive 1.02



2.3 Participation in education expo where minimum one desk is dedicated for CA qualification

1 expo (10 points) 20

2.4 Scholarship for bright and needy students

100% fee waiver for 1% of the total students (6 points)


60

3 Faculty

3.1 Faculty performance evaluated by principal or academic committee of RASS. (There can be different grading system in RASSs. The rating which corresponds to above-normal performance would be treated as “Good” and normal performance would be treated as “Satisfactory”)

More than 90% faculty rated “Good” (40 points)

More than 90% faculty rated “Satisfactory” (20 points)

The evaluation must be based on students and peer evaluation arranged for each faculty member twice in the course


40

3.2 Faculty’s contribution in “Pakistan Accountant” or any other reputable journal.

(The journals other than Pakistan Accountant should be acceptable to principal or academic committee of RASS. The contribution may not necessarily be of technical nature)

4 points for one contribution 40

3.3 Faculty contribution in ICAP’s syllabus review assignments. Each RASS is expected to provide a syllabus review report on the subjects selected by RASS before the commencement of classes of the selected subjects.

10 points for each subject 40

3.4 Faculty contribution in study packs review assignments. Each RASS is expected to provide study material review report on the subjects selected by RASS before the commencement of classes of the selected subjects.

20 points for each subject 40

4 Teaching

4.1 Periodic Tests given to students.

(The test should be documented and verified by the principal or academic committee of RASS)

4 tests per subject in a session (6 points)


60

4.2 Test feedback provided to students by way of marking, evaluator’s comment and model answers.

4 tests per subject in a session (6 points) (Proportional evaluation)

60

Directive 1.02



5 Performance of students

*5.1 AFC (Four subjects)

Performance of enrolled students in ICAP exams

(Enrolled students are those who are other than those who were dropped out after completing less than 40% classes and were duly reported to the Institute)

For each subject

First 50 points - Percentage of passed students over enrolled students is equal to or more than overall result of the Institute (Proportionate Evaluation).

Remaining 50 points – Percentage of passed students over enrolled students exceeding the overall result of the Institute (Proportionate Evaluation)

In case of 100% result of the Institute the proportionate evaluation would be done for full 100 points.

400

*5.2 CAF (Nine subjects)

Performance of enrolled students in ICAP exams

(Enrolled students are those who are other than those who were dropped out after completing less than 40% classes and were duly reported to the Institute)

For each subject

First 50 points - Percentage of passed students over enrolled students is equal to or more than overall result of the Institute (Proportionate Evaluation).

Remaining 50 points – Percentage of passed students over enrolled students exceeding the overall result of the Institute (Proportionate Evaluation)

In case of 100% result of the Institute the proportionate evaluation would be done for full 100 points.

900

6 Fee payment

6.1 Annual renewal fee payable in advance

On time

(Reduce 2 point per day of delayed payment)

30

*Amended in 322nd meeting of the Council held on December 13-14, 2019.

Directive 1.02


Explanatory Notes:

1. Guidance on terms used:

a. “Quality of relevant books”, “Quality of systems” and “Overall outlook and facilities” shall be determined by students feedback on the following scale:

Quality judged

Bad Below Average

Average Above average Good Excellent

Points 0 1 2 3 4 5


recognized under the bye-laws for full or part exemptions from examinations.

c “Planned students’ population” means seating capacity of furnished class rooms.


2. Points will be prorated where the performance achieved against a benchmark is less than the maximum.

**Example:

KPI: Performance of students in AFC- Functional English

Maximum points 100

KPI measure Percentage of pass students

ICAP overall result 6,000 students passed out of 12,500 (48%)

Achieved by RASS 67 student pass out of 120 in Functional English

67/120 =55.83% overall pass result

Pass result is 55.83%-48%=7.83% greater than overall ICAP result

Points gained

First 50 points Result equal to or more than 48% 50

Remaining 50 points Results in excess of 48%

(7.83/100-48)X50 7.52

Total points 58

3. Qualitative evaluations must be supported by a brief description on the subject matter.

Directive 1.02



AS AT ________________________

NAME OF APPLICANT SCHOOL

S. No. Particulars Evaluation based

on scale for achievable points

Maximum points

Points obtained

Mandatory minimum

points

Working paper reference

Submitted by ___________________________ (Signature and name of authorized person)

Date and Place ___________________________________

*****

STATEMENT OF KEY PERFORMANCE INDICATORS

FOR THE PERIOD ________________________

NAME OF RASS

S. No. Indicators KPI measure Maximum points Points obtained Working paper

reference

Submitted by ___________________________ (Signature and name of authorized person)

Date and Place ___________________________________

*****

Directive 1.02

Directive 1.03

TRAINING REGULATIONS AND GUIDELINES

Directive 1.03

C O N T E N T S P a g e #

TRAINING REGULATIONS AND GUIDELINES 2015 TRAINING IN PRACTICE

IP-1 to IP-47

TRAINING REGULATIONS AND GUIDELINES 2016

TRAINING OUTSIDE PRACTICE OP-1 to OP-45

Directive 1.03

Directive 1.03


TRAINING IN PRACTICE

Directive 1.03

Directive 1.03


TRAINING IN PRACTICE


1. Preamble 1

2. Definitions 1

3. Registration of training organizations 1

4. Member Responsible for Student Affairs (MRS) 2

5. Technical Supervisor and Mentor 3

6. Contract, training period and stipend 4

7. Entitlement 5

8. Leaves, service break, working hours, overtime etc. 5

9. Transfer of training contract 6

10. Termination of training contract 6

11. Career progression, training area, assessment etc. 7

12. Statement of terms and conditions of engagement 11

13. Grievance mechanism 11

14. Transition for existing TOs 11

15. Compliance and counselling review 11

16. Non-compliance 12


Annexures 13

Directive 1.03

Training Regulations and Guidelines 2015 - TRAINING IN PRACTICE IP - 1

1. PREAMBLE

In exercise of the powers conferred by Section 15 of the Chartered Accountants Ordinance, 1961 read with the Chartered Accountants Bye-Laws 1983, the Council of the Institute has approved the following regulations and guideline to govern the training of a student of chartered accountancy in a firm of Chartered Accountants as prescribed under the bye-laws:

2. DEFINITIONS

(1) In these Regulations, unless there is anything repugnant in the subject context:

a) Bye-laws means Chartered Accountants Bye-laws 1983;

b) Firm means a sole practitioner or a partnership of members of the Institute engaged in

professional practice;

c) Institute means the Institute of Chartered Accountants of Pakistan;

d) Member means a member of the Institute;

e) Mentor means a sole proprietor/partner or a fulltime employee of a TO responsible for guiding

the Trainee Students on the matters other than technical issues;

f) Member in charge means a member in charge of an office of a firm of chartered accountants as

mentioned in the Form C filed with the Institute;

g) Ordinance means Chartered Accountants Ordinance 1961;

h) Prescribed means as prescribed under the bye-laws;

i) Student means a person registered with the Institute as examinee;

j) Technical Supervisor means a CPD compliant sole proprietor/partner or member being fulltime

employee responsible for development of technical competencies of Trainee Students;

k) TO means Training Organization as defined in the bye-laws;

l) Trainee-on-probation means a person who is registered with the Institute as Student and has

commenced probationary period of training with a TO; and

m) Trainee Student means a Student whose contract of training has been registered with the

Institute and whose period of training is not completed.

(2) Unless the context otherwise requires, all other terms and expressions used but not defined in these

regulations shall have the same meaning as assigned to them in the Ordinance and Bye-Laws; and

words importing the singular shall include the plural and vice versa.

3. REGISTRATION OF TRAINING ORGANIZATION

(1) Application for authorization

The application for authorization as TO shall be submitted in the following manner:

(i) It shall be applied on prescribed application form along with the fee for authorization as

prescribed by the Council from time to time.

(ii) It shall be submitted by the authorized partner of the firm.

Directive 1.03


(2) Prerequisites for authorization as TO

A firm shall be authorized as a TO if it complies with the following criteria:

(i) It has the following minimum number of audits to gain corresponding entitlement to train Trainee Students.

Initial entitlement of 5 Trainee Students per sole

proprietor/partner and member employee

Full entitlement as per bye-laws

Minimum audits 10 25

Including audit of limited companies 5 15

Minimum paid up capital of limited companies being audited (aggregate)

Not applicable Rs.15 million

(ii) It has nominated a CPD compliant Member, being sole proprietor/partner/full time employee, as Member Responsible for Student affairs (MRS);

(iii) For full entitlement, it has nominated MRS who has minimum three year post qualification experience; and

(iv) Any other condition specified by the Council from time to time.

(3) Authorization Process

Authorization of a TO shall be processed as follows:

(i) The Institute shall conduct an evaluation of application for authorization through visits and review of documents and information obtained;

(ii) Upon completion of the formalities for authorization as TO, the Institute shall authorize the firm to act as TO and train Students.

(iii) A certificate to the effect that the firm is an authorized TO shall be issued by the Institute.

(iv) Cases of firms not complying with the prescribed criteria shall be deferred and deficiencies shall be conveyed to the entity for removal of such deficiencies.

(v) If the deficiencies are removed after a period of six months the firm shall be required to re-apply,

otherwise a statement confirming that the deficiencies have been removed would suffice.

(4) Subsequent failure to meet the pre-requisites for authorization

(i) In case a TO falls short of pre-requisites for authorization subsequently, the TO shall inform the Institute within 30 days for appropriate direction.

(ii) The Institute shall have the power to grant waiver or relaxation from any condition for a period not exceeding one year. The reasons for granting waiver or relaxation shall be recorded in writing and communicated to the concerned TO.

(iii) TO shall continue imparting training till further decision.

4. MEMBER RESPONSIBLE FOR STUDENT AFFAIRS (MRS)

(1) TO shall nominate in each office one MRS who shall be the focal person in the office of the TO and shall assume the responsibility of:

(i) signing training contract and timely submission thereof to the Institute;

(ii) intimating nomination of Technical Supervisors and Mentors to the Institute;

Directive 1.03


(iii) intimating allocation of Trainee Students among the Technical Supervisors and Mentors, to the Institute;

(iv) maintenance of training records specified in these regulations and as may be specified by the

Institute from time to time;

(v) coordinating with the Technical Supervisors, Mentors, Students, Trainee Students and the Institute; and

(vi) ensuring compliance with these regulations.

(2) In case a TO has other office where an employee is working as member in charge, the TO shall appoint sole proprietor/any partner as MRS of the said office. Except for signing training contract the nominated MRS may delegate all the assignments to the member in charge of the said office.

5. TECHNICAL SUPERVISOR AND MENTOR

(1) Duties of Technical Supervisor

A TO shall be required to appoint a Technical Supervisor for each Trainee Student who shall:

(i) at the time of induction, arrange orientation and communicate the attributes on which a Trainee Student would be assessed under these regulations;

(ii) ensure proper on-the-job training and practical experience as mentioned in these regulations;

(iii) monitor the career progression plan and assess the progress annually . The outcome of

assessment should be in recorded form;

(iv) provide necessary guidance to the Trainee Student for improvement in the areas identified

during annual assessments; and

(v) as far as practical, avoid overtime work by Trainee Students to allow them adequate time for studies. Provided that where overtime is unavoidable, the Trainee Students shall be compensated in the manner specified in these regulations.

(2) Duties of Mentor

A TO may appoint Mentor for the Trainee Students who may:

(i) act as a trusted, caring and responsible guide who establishes a positive and personal

relationship with Trainee Students and maintains regular interaction and consistent

support;

(ii) provide career guidance and help the Trainee Students to develop broader life management skills; and

(iii) guide the Trainee Students in accessing solutions and resources, which the Trainee Students may need rather than to provide those solutions and resources.

Explanation: Wherever reference to mentor is given in these regulations, it is clarified that these are only applicable when the TO has appointed the mentor.

(3) Allocation of Trainee Students

The allocation of Trainee Students to Technical Supervisors and Mentors shall be in the following manner:

(i) TO shall allocate its Trainee Students among the Technical Supervisors for a period preferably not less than six months.

(ii) The number of Trainee Students allocated to a Technical Supervisor shall not be more than his entitlement to Trainee Students prescribed under these regulations.

(iii) Preferably, allocation of Trainee Students shall be to such Technical Supervisors who are sole proprietor/ partners or employees to whom the Trainee Students are functionally reporting.

Directive 1.03


(iv) Allocation of Trainee Students to Mentors should be in accordance with the policy of the TO. A Mentor shall not be a person to whom the Trainee Student reports functionally.

6. CONTRACT, TRAINING PERIOD AND STIPEND

(1) Contract

(i) There shall be a written contract, on the prescribed format, between the Trainee Students and their Training Organization.

(ii) The contract shall be executed after completion of the probationary period of training and shall be sent to the Institute for registration within the prescribed period and in the manner prescribed under the Bye-Laws.

(iii) In suitable circumstances the Institute shall have the power to condone delay in registration of training contract for maximum of thirty days.

(iv) Delay in submission of contract for more than thirty days shall be treated as non-compliance with these regulations.

(2) Period of training

The training period shall vary according to the qualification of the Students at the time of commencement of training, as follows:

Qualification Period of Training

(i) CAF passed or equivalent thereto 3.5 years

(ii) Four year Graduate / Post Graduate from Specified Degree Awarding Institutes (SDAI)

3 years

(iii) *Four year Graduate / Post Graduate from any recognized degree awarding Institute with major in accounting or finance

3 years

(iv) *All other Graduates including 14 years associate degree holders

4 years

(3) Probationary period

(i) The Students shall be required to complete a probationary period as prescribed under the Bye-Laws.

(ii) The engagement of a Student as a Trainee-on-probation shall be properly documented.

(iii) The Student shall intimate his joining to the Institute within two weeks from the date of joining. A registration as Trainee-on-probation shall be effected upon such application and payment of prescribed fee. The Institute shall send a list of such Trainee-on-probation to the TO on monthly basis.

(iv) TOs shall keep record of satisfactory performance during probationary period.

(v) During the probationary period, the Trainee-on-probation shall be eligible for minimum stipend applicable for Trainee Students as may be specified by the Council.

(4) Stipend

The stipend shall be paid through banking channels and shall not be less than the minimum stipend

specified by the Council.

(5) Reimbursement of out of pocket expenses

TOs shall prepare and implement a policy of reimbursement of out-of-pocket expenses incurred by the Trainee Students on assignments of TOs. Such policy shall be shared with the Trainee Students. A copy of the policy shall be filed with the Institute.

* 285th meeting of the council held on April 7 and 8, 2017.

Directive 1.03


7. ENTITLEMENT

Each TO shall engage Trainee Students as per its entitlement prescribed under the bye-laws, subject to the restriction imposed under Regulation 3.

8. LEAVES, SERVICE BREAK, WORKING HOURS, OVERTIME ETC.

(1) Leave

(i) TOs shall allow leave of absence for examination and other purposes in accordance with bye-law

106(1)(i) during the training period in lieu of which no further training shall be required.

(ii) TOs may also allow leaves during the training period against overtime as specified in these

regulations in lieu of which no further training shall be required.

(iii) TOs may also allow additional leave of absence of up to sixty days due to sickness, examinations

or any other suitable reason in lieu of which Trainee Students shall be required to undergo

further training for an equivalent period. TO shall intimate such cases to the Institute upon

completion of training contract.

(iv) All further leaves shall be subject to prior approval of the Institute and in lieu thereof Trainee

Students shall be required to undergo further training for an equivalent period.

(v) In calculating the number of leaves availed, weekends and public holidays falling at the start and

the end of leave period shall not be counted.

(2) Service breaks

(i) The training period shall be completed without any service break except in the following

circumstances, under intimation to the Institute:

(a) For any reason deemed appropriate by TO the service break of up to six months shall be

allowed during the full tenure of training.

(b) Female Trainee Students shall be eligible for a break in their training period of up to one

year on account of marriage and/or maternity during the full tenure of training.

(ii) Service break for a period more than specified in this regulation shall be permitted with the prior

approval of the Institute.

(iii) TO may not pay any stipend during such period(s) of absence.

(3) Working hours and overtime

(i) During the training period a Trainee Students shall be required to accumulate working hours

computed on the basis of 1,800 hours per year of training. For computing working hours

standard recess time as per policy of TO shall be excluded.

(ii) The timing and working days shall be specified by the TO. Provided it ensures that the Trainee

Students completes 1800 hours per year of training.

(iii) In case working hours exceed the number of hours specified in (i) above, the TO shall allow one

day leave in lieu of each eight hours.

(iv) Any unadjusted excess hours shall be compensated by way of overtime payment. The rate of

overtime payment shall not be less than the rate computed on the basis of latest monthly

stipend of the individual Trainee Student.

Directive 1.03


9. TRANSFER OF TRAINING CONTRACT

(1) The training contract may be transferred:

(i) by mutual agreement between the TO and the Trainee Student,

(ii) in case TO ceases to exist or ceases to be a TO, or

(iii) when the number of Trainee Students engaged with the TO exceeds the entitlement of TO under these regulations.

(2) Transfers by mutual agreement

(i) In the event of transfer of training contract by mutual agreement between the TO and the Trainee Student, the TO transferring the Trainee Student shall send to the Institute a copy of no objection certificate issued to the Trainee Student within thirty days of the issuance thereof.

(ii) The Trainee Student may apply to the TO for transfer of training contract and issuance of no objection certificate.

(iii) TO shall not require more than three month notice period for issuance of no objection certificate.

(3) Transfers in case TO ceases to exist or ceases to be a TO

Trainee Students of a TO, which ceases to exist or ceases to be a TO due to any reason, shall enter into fresh contract for the residual period, with another TO within three months from the date of such cessation. Such fresh contracts shall be sent to the Institute for registration and shall be registered by the Institute without any registration fee.

(4) Transfers when the number of Trainee Students exceeds the entitlement

If entitlement of a TO falls short of number of its Trainee Students, due to any reason including death, resignation, retirement and suspension of membership of partner(s) or fulltime employee of a TO, it shall immediately inform the Institute of the fact. The Institute may direct the excess Trainee Students, most recent in order of their registration:

(i) to enter into fresh contract for residual period with any other TO within a given time period for which no registration fee shall be charged by the Institute; or

(ii) to continue with the same TO for the residual period.

10. TERMINATION OF TRAINING CONTRACT

(1) TO may terminate the training contract if a Trainee Student:

(i) is guilty of:

(a) misconduct;

(b) misbehavior; or

(c) breach of any of the provisions of the Training Contract; or

(ii) fails to progress satisfactorily as per criteria established by the TO.

(2) The following procedures shall be followed, if TO is satisfied that a Trainee Student has prima facie committed any act(s) as mentioned in (1) above:

(i) TO shall issue a show-cause notice to the Trainee Student under a registered cover or through recorded mode of delivery, on the Trainee Student’s address registered with the TO.

(ii) If on receipt of response of the Trainee Student, the TO is not satisfied, it shall grant the Trainee Student an opportunity of hearing.

(iii) In case the Trainee Student does not respond or does not attend the hearing, he shall be informed about the exparte proceedings in the matter.

Directive 1.03


(iv) If the TO is satisfied, that the Trainee Student has committed any act(s) as mentioned in (1)

above, it may terminate, the training contract of the Trainee Student under intimation to the

Institute along with a ‘report on termination’ specified under these regulations.

(v) All correspondence made in this regard by the TO or the Trainee Student shall be through

recorded mode of delivery with proof of delivery.

(vi) In the event of professional misconduct by a Trainee Student, falling under schedule III of the

Ordinance, the TO shall report the matter to the Institute.

(vii) A Trainee Student aggrieved by the termination of his training may prefer an appeal to the

Council as prescribed under bye-law 107.

11. CAREER PROGRESSION, TRAINING AREA, ASSESSMENT ETC.

(1) Career Progression Plan

(i) The progression of a Trainee Student shall be through the following roles or through any suitable alternate designations with prior intimation to the institute:

(a) Assistant trainee

(b) Associate trainee

(c) Senior associate trainee

(ii) There shall be a Career Progression Plan (CPP) for Trainee Students which may contain the following:

(a) Qualification or achievement in examinations of the Institute required by TO for each role, subject to the minimum conditions applicable under the bye-laws and under these regulations;

(b) Minimum period of training required for each role;

(c) Minimum achievement required for each role in the periodic assessment of professional skills and professional values ethics and attitude

(iii) Policy on CPP shall be submitted to the Institute within three months from the date of authorization as TO.

(iv) TO may amend the policy on CPP any time it deems necessary under intimation to the Institute.

(2) Training areas – Technical Competencies

TOs should have a formal mechanism to support the development of technical competencies through on-the-job training. It is expected that the TO shall provide the Trainee Students practical exposure in the technical areas given in this regulation. The allocation of training period to various training areas shall be as follows:

Training area Period allocation

(i) Audit, assurance and related services

Not less than 1/3rd (ii) Accounting and Financial Reporting

Directive 1.03


Training area Period allocation

(iii) Taxation and corporate law

Remaining period (iv) Financial Management, management advisory and information technology

(v) Any area deemed appropriate by TO

(3) Training areas – Professional skills

The training outcome relating to each type of professional skills shall be as follows:

(i) Intellectual

(a) Research and evaluate information from a variety of sources and perspectives and draw

appropriate conclusions.

(b) Identify, evaluate, and recommend solutions to unstructured, multifaceted problems.

(c) Apply innovative and critical thinking to solving problems.

Minimum proficiency under this head shall be of intermediate level.

(ii) Personal

(a) Apply the principles of lifelong learning.

(b) Set high personal standards of delivery and monitor personal performance, through

feedback from others and through reflection.

(c) Evaluate professional commitments and manage time and resources for their achievement.

(d) Proactively anticipate challenges and plan potential solutions.

(e) Display openness to new ideas and opportunities.


(iii) Interpersonal and communication

(a) Promote cooperation and teamwork, working towards organizational goals.

(b) Communicate clearly and concisely when presenting, discussing and reporting in formal and

informal situations, both in writing and orally.

(c) Use active listening and effective interviewing techniques.

(d) Use negotiation skills to reach appropriate solutions and agreements.

(e) Use consultative skills to minimize and resolve conflict in a work environment

(f) Display sensitivity to cultural and language differences in all communication.

(g) Present ideas and persuade others to provide support and commitment.


Directive 1.03


(iv) Organizational

(a) Undertake work assignments in accordance with established methodologies and within the

prescribed deadlines.

(b) Review work to determine whether it complies with the organization’s quality standards.

(c) Use effective people management skills to motivate and develop others.

(d) Use effective delegation skills to deliver work assignments.

(e) Demonstrate effective leadership skills.


(4) Training areas – Professional values, ethics and attitude

There shall be the following training outcome relating to professional values, ethics and attitude:

(i) Professional skepticism and professional judgment

(a) Apply a skeptical mindset to critically assess financial information and other data relevant to the role of a professional accountant.

(b) Identify and evaluate reasonable alternatives to reach well-reasoned conclusions based on all relevant facts and circumstances.


(ii) Ethical principles

(a) Explain the nature of ethics.

(b) Explain the advantages and disadvantages of rules-based and principles-based approaches to ethics.

(c) Apply the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior to ethical dilemmas and determine an appropriate resolution.

(d) Apply the relevant ethical requirements to professional behavior and compliance with standards.


(iii) Commitment to the public interest

(a) Explain the role of ethics within the profession and in relation to the concept of social responsibility.

(b) Explain the role of ethics in relation to business and good governance.

(c) Analyze the interrelationship of ethics and law, including the relationship between laws, regulations, and the public interest.

(d) Compare the consequences of unethical behavior to the individual, to the profession, and to society at large.


Explanation: Learning outcomes at the intermediate level relate to work situations that are characterized by moderate levels of ambiguity, complexity, and uncertainty.

Directive 1.03


(5) Assessment of professional development by TO

(a) The assessment of professional skills, values, ethics and attitude shall be carried out by TOs as nearly as practical on the format attached with these regulations.

(b) The assessments shall be done within three months before or after completion of each year of training and finally after the completion of training.

(c) The Institute may also assess professional skills, values, ethics and attitude through prescribed examinations.

(d) Copy of the assessment carried out by TO shall be provided to the Trainee Student and the same shall be shared with the Institute along with completion certificate.

(6) Record keeping of training by Trainee Student

(i) Trainee Students shall prepare the record of their training. The same shall be submitted to TO periodically as per policy of the TO.

(ii) The TO shall specify the records to be maintained by its Trainee Students and the TO itself. The following minimum record shall be prepared by the Trainee Students:

(a) Monthly time sheet duly authenticated as per TO’s policy

(i) Date

(ii) Nature of assignment based on the major category of technical competency required to perform the assignment

(iii) Name of client of TO

(b) Annual/Completion record duly discussed and seen by Technical Supervisor

(i) Major category of technical competency covered during the year

(ii) Value of experience gained

(iii) New exposure or advancement in previous exposure

(iv) The level of management with whom communicated and dealt

(v) Any ethical issue or dilemma faced

(vi) Comments of Technical Supervisor

(iii) TOs shall be responsible for custody of original record submitted by the Trainee Students.

(iv) TOs shall be responsible for keeping record of annual assessments as specified in these regulations.

(v) The annual record shall be submitted to the Institute within three months from the date of completion of respective year of training.

(7) The Institute shall perform a periodic review of the training record kept by the training organization and Trainee Students.


The Institute may offer an online compulsory course on professional values, ethics and attitude. The Institute may consider similar in-house courses offered by TOs as equivalent to the Institute’s course.

(9) Certificate of Completion

On completion of the training every TO shall send a certificate of completion to the Institute within 15 days.

Directive 1.03


12. STATEMENT OF TERMS AND CONDITIONS OF ENGAGEMENT

(1) TO shall apprise the Trainee Students in respect of policies and procedures set forth by TO.

(2) Such policies and procedures shall be in documented form duly acknowledged by the Trainee Student

and to include the following:

(i) Mentor and allocation of Trainee Students among the Mentors

(ii) Re-imbursement of out-of-pocket expense

(iii) Leaves and service breaks

(iv) Office timing and overtime compensations

(v) Transfers and procedure for issuance of no objection certificate

to enable students to join other TO

(vi) Career Progression

(vii) Trainee Students rotation in different areas

(viii) Record to be prepared by Trainee Students

(ix) Grievance mechanism

13. GRIEVANCE MECHANISM

(1) TOs shall prepare and implement a policy that deals with grievances of Trainee Students and nominate a

person with whom Trainee Students should contact in this regard. Such policy shall be shared with the

Trainee Students.

(2) A copy of the policy shall be filed with the Institute.

14. TRANSITION FOR EXISTING TOs

(1) All firms which are authorized TOs at the commencement of these regulations shall comply with the

requirements of these regulations. Provided that TO shall within three months intimate to the

Institute any requirement which is practically not possible to be complied with or which requires some

transition time.

(2) Institute shall have the power to grant waiver or relaxation from any requirement. Decision of such

waiver or relaxation shall be made after recording reasons thereof.

15. COMPLIANCE AND COUNSELING REVIEW

(1) The Institute shall have the right to visit the premises of the TO.

(2) The objectives of the visits shall include:

(i) To give and take feedback on training program of the TO;

(ii) To assist TO in performing its responsibilities towards training of Trainee Students; and

(iii) To review documents necessary to ensure compliance with the Training Regulations.

(3) The visits of representatives of the Institute shall be undertaken on the date mutually agreed between

the Institute and TO.

(4) A report of the visit shall be made and shared with TO.

Directive 1.03


16. NON-COMPLIANCE

(1) If default is made in complying with the requirement of these regulations, the Institute may;

(i) direct the TO in default to comply with the requirement within a specified period;

(ii) suspend authorization of TO in default for a specified period; or

(iii) cancel the authorization of TO in default.

(2) A TO aggrieved by the decision of the Institute may prefer an appeal to the Council.

17. EFFECTIVE DATE

This Directive shall be effective from September 1, 2015.

Directive 1.03


ANNEXURES

Particulars Form

Forms

Application for registration as Training Organization U - Details of management personnel U/A - Details of other training offices U/B - Details of audit U/C - Declaration U/D - Undertaking U/E - Certificate of Approval as Training Organization

Statement of particulars for registration as Trainee Students Q

Training Contract R

Deed of amendment of training contract R/A

Certificate of completion of training S

No Objection Certificate T

Report on termination of training contract ZB

Sample documents for guidance purposes

Sample daily record -

Sample Annual record -

Sample assessments of Trainee Students -

Sample record of satisfactory performance during the probationary period -

Sample Career Progression Plan -

Others

Minimum Stipend -

Directive 1.03


FORM - U

APPLICATION FOR REGISTRATION AS TRAINING ORGANIZATION

To: The Directorate of Education and Training The Institute of Chartered Accountants of Pakistan Chartered Accountants Avenue Karachi – 75600.

DETAILS OF PROPOSED TRAINING ORGANIZATION (TO)

Name _________________________________________________________________________________________________________

Registered Address _____________________________________________________________________________________________

______________________________________________________________________________________________________________

City / Town _________________________________ Country____________________________________________________________

Phone ______________________________________ Fax No ___________________________________________________________

E-mail_______________________________________ Website __________________________________________________________

Number of other Office(s)___________________ Number of Partner(s) ____________________________________________________

Number of Qualified Employee(s)___________

□ Sole Proprietorship □ Partnership

DETAILS OF MEMBER RESPONSIBLE FOR STUDENT AFFAIRS (MRS)

Name:________________________________________________________________________________________________________

Membership No. _____________________________________ Membership Date: ___________________________________________

Phone _________________________________ Fax ________________________________ E-mail:_____________________________

DETAIL OF AUDITS

Total number of Audit: __________________________________________________________________________________________

Public Listed Companies: ______________________________________ Others: ________________________________________

Paid up Capital in aggregate: ______________________________________ ______________________________________ _______

Directive 1.03


___________________________________________________ Name:_________________________________________________

Signature On behalf of _____________________________________ Designation: Partner In charge (Please mention the name of Training Organization)

Place: _________________________________________________

Office Seal:________________________________________ Date: __________________________________________________

Note: Please also fill in the annexures A to E


File No.

Checked By ________________________________________________________________ Date ________________________________

Application endorsed by Appraisal consultant (if required) ________________ Date _______________________________

Put up to Executives of the Institute ______________________________________ Date ________________________________

Registered / NOT Registered________________________________________________ Date ___________________________________

Directive 1.03


ANNEX A to FORM - U

DETAILS OF MANAGEMENT PERSONNEL

Details of Partners / Sole Proprietor

Member-

Years of Post Qualification

Location Individual

Name of Partner Member- experience as Member

S #

(ACA/FCA)

ship

ship Date

In other

of Training student’s

Number

In Practice

Office entitlements

Discipline

Please give following information if any of the partner(s) of the Training Organization is also a partner/sole practitioner in any other Training Organization

S # Name of Partner

Name of CA Firm / TO Partnership / Entitlements

(ACA / FCA) Sole Proprietor Availed

Details of MRSs

S # Name of MRS

(ACA/FCA)

Member-

ship Number

Years of Post

Member- Qualification experience Location CPD

as Member of Training compliance

ship date

Office Status

In Practice

Outside

practice

Continued on Reverse

Directive 1.03


Details of Qualified Employee(s)

S # Name Membership Membership Years of Post Location of

Number date

Qualification Training Office

experience

Details of Technical Supervisors (partners)

Membership Membership

Years of Post Location CPD

S # Name Qualification of Training compliance

Number date experience Office Status

Details of Technical Supervisors (employees)

S # Name Membership Membership Years of Post Location CPD

Number date Qualification of Training compliance

experience Office Status

Directive 1.03


Details of Mentors (partners)

Membership Membership

Years of Post Location CPD

S # Name Qualification of Training compliance

Number date experience Office Status

Details of Mentors (employees)

S # Name Membership Membership Years of Post Location CPD

Number date Qualification of Training compliance

experience Office Status

Directive 1.03


ANNEX B to FORM - U

DETAILS OF OTHER TRAINING OFFICES Name of Training Organization: _________________________________________________________________________________

Address of Training Office: _____________________________________________________________________________________

City / Town: ________________________________________________ Country: ___________________________________________

Phone _________________________________ Fax ________________________________ E-mail:_____________________________

Name of Nominated MRS:_______________________________________________________________________________________

Membership No: ____________________________________Membership Date:________________________________________

Phone _________________________________ Fax ________________________________ E-mail:_____________________________ Number of Partner(s) in training office __________________________________________________________________________

Number of Qualified Employee(s) in training office_______________________________________________________________

Number of Technical Supervisors(partners) in training office_____________________________________________________

Number of Technical Supervisors(employees)in training office___________________________________________________

Note: Please fill in separate Form for each training office.

Directive 1.03


ANNEX C to FORM - U

DETAIL OF AUDITS

Name of Client audited Nature of

Public/Private Limited Paid up

S # / Sole Proprietor / Capital Remarks

with address Business Other (Rs. in million)

Total paid up capital:

Directive 1.03


Annex – D to Form U

D E C L A R AT I O N

It is hereby declared that _______________________________________ will abide by all terms and conditions (name of Training Organization)

given in approved Training Regulations and Guidelines and other provisions of CA Bye-Laws / Directives /

Instructions made by or on behalf of the Council of the Institute from time to time in respect of Trainee

Students and Training Organization.

It is further undertaken that ________________________________________ agrees to monitoring visits by the

(name of Training Organization) Institute’s consultant / representative and will implement recommendations resulting from such visits and the

Member Responsible for Student Affairs shall inform immediately to Institute of Chartered Accountants of

Pakistan if the Training Organization falls short of prescribed authorisation criteria.

Place: _____________________________________ Signature: ___________________________________

Date: _____________________________________ Name: ____________________________________________

Designation: ________________________________

Office Seal

On behalf of ________________________________

(Please mention the name of Training Organization)

Note: This declaration is to be on the letterhead of the Training Organization without typing Annex D on it.

Directive 1.03


Annex – E to Form U

U N D E R TA K I N G

I ______________________________Membership No________________ designated as___________________

Member Responsible for Student Affairs (MRS) by _________________________________________________

_________________________________ for its Training Office at _____________________________________ under bye-law 102 of the CA Bye-laws 1983 do hereby undertake that I have thoroughly read and have the

knowledge of the relevant Sections of the Ordinance, Bye-Laws, Training Regulations and Guidelines, Institute’s

schemes of education and Directives of the Council. I have the ability to advise, counsel, evaluate, motivate and

provide direction to Trainee Students; I have the ability to assume the responsibility of ensuring that annual

evaluations are made and also assume the responsibility of maintenance of the records strictly as prescribed in

the Training Regulations and/or the Guidelines, or otherwise as may be directed by the Committee from time

to time. I shall comply with all the future directives and requirements to this effect and have full awareness of

the ethics governing the meaning, purview and obligations of an MRS under bye-laws and Training Regulations.

Signature: ___________________________________

Place: _______________________________________

Date: _______________________________________

Office Seal

Note: This undertaking will be given on the letterhead of the Training Organization without typing Annex E on it.

Directive 1.03


TO-Number.




TO name and Office

is an approved

Training Organization In Practice

of The Institute of Chartered Accountants of Pakistan Director Education, Training and CPD Date:__________________________

Directive 1.03


Form ‘Q’

STATEMENT OF PARTICULARS FOR REGISTRATION

AS TRAINEE STUDENT BYE-LAW 98 (1) & (2)

1. Name of Trainee Student:

2. Father’s Name:

3. Date of Birth Nationality:

4. NIC No:

5. Qualifications:

Educational Qualification (Academic)

Examinations Passed

Month & Year of Exam

Grade/Div Board / University/

Institute

Professional Qualification

(eg CA PIPFA, ACCA, CIMA, ACMA, MBA etc)

6. CRN and date of issuance _______________________________________________________________________

7. Addresses (Communication Address) ______________________________________________________________

_____________________________________________________________________________________________________________

(Permanent Address) ___________________________________________________________________________

_____________________________________________________________________________________________________________

8. Name of MRS_________________________________________________________________________________

Name of Training Organization __________________________________________________________________

Address _____________________________________________________________________________________

____________________________________________________________________________________________

9. Present Status with CRN ________________________________________________________________________

Continued on reverse

- -

Affix a recent Photograph of (1”x1”) which should not be more than 3 months old

Directive 1.03


IN CASE OF RE-REGISTRATION UPON TRANSFER TO

ANOTHER TRAINING ORGANIZATION UNDER BYE-LAW 103 (I)

a. CRN:

b. Name of Previous MRS:

c. Name of Previous Training Organization:

d. Period Served From: to

e. Details of leave availed

f. No objection certificate: Yes No

I declare that the particulars given above are true and correct to the best of my knowledge and belief

Date:

Place:

Endorsement by the MRS

“I certify that the above particulars furnished by the Trainee Student are correct. He/She has completed the

probationary period from__________________________to__________________________successfully”.

Date:

Place:

(Seal of Office)

ATTACHMENTS 1. Birth certificate and Matriculation Certificate duly attested by MRS/ Partner of Training Organization

(not required in case of transfer). 2. Attested copy of certificate in respect of educational and professional qualifications with photocopies

(not required in case of transfer). 3. Copy of NIC 4. Photograph size 1”x1” to be pasted on this form and one attested (by MRS / Partner) copy to be attached.

Study Sick Others Total

Signature of Trainee Student

Signature of the MRS

Directive 1.03


FORM ‘R’

TRAINING CONTRACT

(Bye-Law 99) Stamp values applicable in each

province of Pakistan

at time of execution

of contract

1. The parties to this Training Contract are:

Name of Student __________________________________, referred to herein as the ‘Trainee Student’

Address ____________________________________________________________________________

_________________________________________________________________________________________________

Name of MRS_______________________________________________, referred to herein as the ‘MRS’

Name of Training Organization__________________________________________________________

Address_____________________________________________________________________________

_________________________________________________________________________________________________ 2. The person named below shall be responsible for the Trainee Student’s personal and professional

development:

(i) Name of Technical Supervisor_____________________________________________________

(ii) Name of Mentor, if any _________________________________________________________ 3. This Training Contract governs the Approved Training to be provided to the Trainee Student by an

Authorized Training Organization under the Chartered Accountants Bye-Laws, 1983 (as amended from time to time) for the purpose of equipping the Trainee Student with the technical competencies, professional skills and professional values, ethics and attitude necessary for membership of the Institute of Chartered Accountants of Pakistan (referred to hereafter as “the Institute”).

4. *a This Training Contract begins on __________ the ____day of __________ in the year _________and

shall continue until the Trainee Student has completed ___years of Approved Training.

*b In case of transfer of Trainee Student from one Training Organization to another, the residue training period begins on __________ the ______day of __________ in the year ____________ and shall continue until Trainee Student has completed _________ year(s) _________ month(s) _______ day(s) of remaining Approved Training.

* (In (a) or (b) write NA whichever not applicable.)

Directive 1.03


5. This Training Contract shall be subject to the provisions of the CA Ordinance, Bye-Laws and the Training

Regulations and Guidelines made by the Council of the Institute from time to time, whether or not such

provisions and or regulations came into force before or after the commencement of this Training

Contract and the parties agree to comply with such provisions in all respects. The parties hereby

acknowledge their mutual commitment to provide an effective training on the one hand and a proper

contribution to the work of the MRS’s Office on the other.

6. The Trainee Student is required to, under this Training Contract, carry out work at his Training

Organization and at other locations and other organizations as specified by or under the authority of

the MRS or his Training Organization, provided that such service will count as Approved Training within

the regulations.

7. The Trainee Student agrees that, during the existence of this Training Contract and for any period following its expiry or termination during which eligibility to qualify for admission or to be admitted as an Associate of the Institute continues, the Trainee Student will: a. use every effort to further the objects of the Institute; b. observe and uphold the ethical and professional standards of the Institute; c. provide promptly and willingly all possible information and assistance if asked to do so by

the Institute in the pursuance of its duties; d. properly carry out the duties lawfully assigned by his Training Organization and diligently

pursue the studies required of Trainee Students of the Institute; e. maintain the confidential nature of the affairs of the Training Organization and its clients

including the names and the nature of the business of such clients; f. not practice as a public accountant; g. not engage in any other business or occupation; and h. regularly maintain records of Approved Training in such form as may be required by the

Institute.

8. The Training Organization agrees that: a. it will provide the Trainee Student with Approved Training to the best of his ability for the

purposes set out in clause 3 of this training contract; b. it will ensure compliance of all Bye-Laws, Training Regulations, Council Directives and other

provisions / instructions issued from time to time by the Institute, in respect of Trainee Student training and administration;

c. it shall pay the monthly stipend and provides other compensation to its Trainee Students as may be specified by the Institute from time to time during the period of training;

d. it will monitor the career progression plan and assess the progress annual in recorded form. e. provide the name of any person nominated as Technical Supervisor to replace the person

named in clause 2 of this Training Contract.

9. This Training contract may be terminated: a. by mutual agreement between the parties; or b. As prescribed in Bye-Law 107 of CA Bye-Laws 1983

10. This Training Contract may not be altered or amended except as provided for in Bye-Law 100 of CA Bye-Laws 1983.

In witness whereof this Training Contract has been duly executed this __________ the ____day of __________ in the year _________.

Directive 1.03


Trainee Student’s Signature_____________________________________

In the presence of:

Signature of Witness: __________________________________________ Name _______________________________________ CNIC No. Place______________________________________________

MRS’s Signature________________________________________________ Seal of Office___________________________________________________ In the presence of: Signature of Witness: __________________________________________ Name _______________________________________ CNIC No.

Place______________________________________________

FOR OFFICE USE ONLY

CRN_______________________________________________ Date___________________________________________

Entered in the Register of Trainee Students

___________________________________________________ Office Seal Signature

INSTRUCTIONS FOR COMPLETION AND FORWARDING OF THIS FORM

a. Three copies of this contract are to be completed and forwarded to the Institute within 30 days of completion of the probation period (2 months from the date of Trainee Student’s joining the Training Organization).

b. Special Adhesive Stamps are to be affixed to original and duplicate copies only of the Training Contract. c. Form ‘Q’, duly completed in all respect is to accompany this Training Contract along with all

attachments mentioned therein. d. The correcting fluid shall not be used. e. Bank Credit Voucher/Pay Order/Demand Draft for Registration Fee is to be forwarded with this

Training Contract. f. All Registration documents are to be forwarded under a covering letter of the Training Organization. g. Witness to Trainee Student and MRS’s Signature should be of male adults.

Note: Specified Training Period: (1) CAF Passed or equivalent thereto 3.5 years (2) Four year Graduate / Post Graduate from Specified Degree Awarding Institute (SDAI) 3 years (3) *Four year Graduate / Post Graduate from any recognized Degree Awarding Institute with major in accounting or finance 3 years (4) *All other Graduates including 14 years associate degree holders 4 years

-

-

-

-


Directive 1.03


ANNEX A to FORM - R ON RS. 50/- STAMP PAPER

DEED OF AMENDMENT OF TRAINNG CONTRACT (For Service breaks)

This deed of amendment of training contract made and executed this________________________________________________

BETWEEN:

M/s. ___________________________________________ and _________________________________ CRN. _____________________

WHEREAS the above parties have signed the training contract dated__________________________________________________

Registered with the Institute on ____________________________________________________ for ________________________ years.

from________________________________________________________to____________________________________________under

Bye-law 99 of Chartered Accountants Bye‑Laws, 1983.

AND WHEREAS the both parties decided to amend the training contract to the extent that the com pletion date has been

changed to____________________________________________________________________due to service break to be availed

from________________________________________to________________________________________ ( __________ days) by

________________________ ( Trainee Student) in accordance with the directives of the Institute.

NOW THEREFORE this deed of amendment of training contract witnessed to read this as under:-

“The Completion date of the training contract has been revised from _______________________ to ______________________ .

“That as amended as aforesaid the other terms and conditions in training contract dated ____________________ shall remain in

full force and effect.”

Witnesses: 1.___________________________ ________________________________________

Signature of the Trainee Student

2.___________________________ ________________________________________

Signature and Name of MRS

Name of Training Organization

(Execution date)

(Trainee Student) (Training Organization)

(Original date) (New date)

Directive 1.03


ON TRAINING ORGANIZATION’S LETTERHEAD (FORM ‘S’)

The Director Education and Training


CERTIFICATE OF COMPLETION OF TRAINING

I certify that the Trainee Student named below served as Trainee Student under registered training contract with me for the period stated in accordance with the bye-laws, of the Institute of Chartered Accountants of Pakistan and that his/her progress was satisfactory.

MRS

TRAINEE STUDENT

Name: _______________________________________

Father’s Name : ________________________________

PERIOD OF TRAINING SERVED (Including approved excess leave period)

IN FIGURES

From To

D M Y D M Y

IN WORDS

From _________________________________To ________________________________________

LEAVE AVAILED

Normal Excess * Total leave availed

* Excess leave approved by ICAP’s letter No. __________________________ dated __________________________

IN CASE OF RE-REGISTRATION UPON TRANSFER FROM ANOTHER TRAINING ORGANIZATON OR MRS

Previous MRS:_________________________________

TO: _________________________________________

CRN No. _____________________________________

Period served From: ___________ To: _____________

Leave availed: Days

Previous MRS: _________________________________

TO: _________________________________________

CRN. _________________________________________


Leave availed: Days

Date: __________________________________________

Place: _________________________________________

c.c Mr./Ms. ________________________________

Signature of MRS

* This Certificate must not be issued until the excess leave has been approved by the Institute, if required, and the Trainee Students has served the period in lieu of excess leave in the training organization.

NAME AND ADDRESS OF TRAINING ORGANIZATION

ICAP CRN

Seal

Directive 1.03


FORM ‘T’

NO OBJECTION CERTIFICATE

[Bye-Law 103(1) & (2)]

I______________________________________________of__________________________________________

_________hereby certify that Mr/Ms____________________________________________served as a Trainee

Student under me in accordance with the Chartered Accountants Bye-Laws, 1983 for a period of________

years(s)________ month(s) and________ days(s) from _____________________ to_____________________

under CRN________________ and that I have no objection in transferring his/her Training Contract to another

registered training organization.

I hereby certify that during the above mentioned period the trainee student was given leave for________ days.

I further certify that during the above mentioned period his / her work was satisfactory. The trainee student has also served with:

Name of Training Organization_____________________________________________________________________________________

Name of MRS___________________________________________________________________________________________________

From___________________________________ to______________________________________ CRN___________________________

Date___________________________________ and availed ____________________days leave.

Place___________________________________ Date___________________________________

Office Seal _____________________________________________

Signature of MRS

Directive 1.03


FORM ‘ZB’

REPORT ON TERMINATION OF TRAINING CONTRACT UNDER BYE-LAW 107(I) OF THE CA BYE-LAWS, 1983

Name of Trainee Student__________________________________________________________________________________________

CRN___________________________________________________________________________________________________________

Period ___________________________________________________ Date of________________________________________________

Commenced on________________________________________Termination________________________________________________

Name of MRS____________________________________________________________________________________________________

Name of Training_________________________________________________________________________________________________

Organization____________________________________________________________________________________________________

Address of TO___________________________________________________________________________________________________

_____________________________________________________________________________________________________________________

MRS’s Report

_____________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________ Certified Copies of Following Documents Enclosed: 1. Show Cause Notice 2. Trainee Student’s Reply to Show Cause Notice 3. Hearing Proceedings 4. Any other relevant correspondence /papers in respect of the matter Date______________________________________________ _____________________________________________

Signature & Seal of Office

Directive 1.03


For THE INSTITUTE Use Only

Actions Date

1. Documents Checked ____________________________________________________

2. Termination Recorded ____________________________________________________

3. Letter of acknowledgement to MRS and copy to Trainee Student issued ____________________________________________________

4. Receipt of Appeal from Trainee Student (if any) ____________________________________________________

5. Reference of Appeal to the Council ____________________________________________________

6. Decision of the Council ____________________________________________________

_____________________________________________________________________________________________________________________________ ___________________

_____________________________________________________________________________________________________________ ___________________________________

_____________________________________________________________________________________________________________________________ ___________________

Date _____________________________________ ____________________________________________________ Signature

Directive 1.03


Daily Record

Trainee Students Name__________________________________________CRN______________________________________________

Trainee Students Role_______________________________________ (Assistant trainee)____________________________________

Technical Supervisor Name_________________________________________________________________________________________

Major category of Technical Competencies

(Mark the relevant)

S.No Date Name of the Audit, assurance Accounting Taxation & Financial Any other

client & related services & financial Corporate Management, appropriate

Reporting law management Area

advisory & IT

1 01/07/13 XYZ Ltd.

2 02/07/13 XYZ Ltd.

3 03/07/13 XYZ Ltd.

4 04/07/13 ABC welfare



____________________________________________________ ____________________________________________________

Trainee Students Sign off Technical Supervisor sign off

Directive 1.03


Annual Record

Trainee Students Name______________________________________________CRN__________________________________________

Trainee Students Role____________________________________________________________________________________________


From__________________________________ to __________________________________

S. No Major category of Technical Competencies (Mark the

relevant)

1 Audit, assurance & related services

2 Accounting & financial Reporting

3 Taxation & Corporate law

4 Financial Management, management advisory & IT

5 Any other appropriate area

Value of the Experience Gained The intention of this section is to have you reflect on where you are today in terms of competency development and what value it has on your professional standing. Example: I gained assurance experience of a large sized textile industry involved in yarn manufacturing.

New Exposure or Advancement or advancement to previous exposure The intention of this section is to reflect on specific exposure.

Specific areas I was exposed to was computation of Income Tax along with deferred tax. This is the first time I computed tax of this level of complexity that required good understanding of normal and final tax regime

The level of management with whom communicated and dealt The intention of this section is to reflect your interaction with higher management.

CFO level frequently and CEO once at planning stage. Any ethical issue or dilemma faced The intention of this section is to have you reflect on where you are today in terms of competency development and what value it has on your professional standing. At the client in accounts department, I met one of my old friends. I consulted my job in charge and found that it does not create noticeable familiarity threat.

Directive 1.03


Comments of Technical Supervisor The intention of this section is to have a feedback on your progress and development.

I reviewed the form and found correct. It would have been better if he had mentioned at least two major jobs he was assigned.

Trainee Student Sign off: I confirm that the above information accurately reflects the exposure and level to which I have demonstrated over this annual period of my practical experience and my reflective thought from my work assignments for the said period. Date ____________________________________________________ ____________________________________________________

Signature

Technical Supervisor sign off. I have met with the CA Student noted above and discussed his/her competency and professional development and progression according to our CA Training Program. Date ____________________________________________________ ____________________________________________________

Signature

Directive 1.03


CAREER PROGRESSION PLAN

Training Organization___________________________ ________________________________________

Trainee Student Name__________________________________________CRN_____________________

Technical

Minimum Required

required Professional Skills Professional Values, ethics & Attitude

Competency Training score

Professional

Intellectual personal Interpersonal

Organizational skepticism Ethical Commitment

and and Principles

to the public

Communication professional interest

judgment

(Total score from detailed assessment sheets)

Assistant - -

trainee

Associate Cleared 6 12 >60%

trainee papers of months

CAF

Senior Cleared 3 24 >70%

Associate papers of months

trainee CFAP

Directive 1.03


RECORD OF SATISFACTORY PERFORMANCE DURING THE PROBATIONARY PERIOD

Name of the Trainee-on-probation ___________________________________________CRN____________________________________

Father’s Name___________________________________________________________________________________________________

Name of MRS___________________________________________________________________________________________________

Probationary period start Date__________________________________________________________________________________

Probationary period end Date___________________________________________________________________________________

Particulars Total Marks Marks obtained

Aptitude for CA qualification 35

Awareness of personal performance 25

Follows the Instructions 25

Awareness of ethical principles( Integrity, objectivity and 15

Confidentiality)

Overall rating

□Unsatisfactory □Satisfactory □Good □Excellent

Trainee-on-probation Sign off________________ MRS sign off______________________________

Date_________________________________________ Date______________________________________

(Note: TO shall establish its own benchmark for rating a Trainee-on-probation)

Directive 1.03


ASSESSMENT OF TRAINEE STUDENT

ASSISTANT TRAINEE ASSESSMENT

S. No. Particulars Reviewer’s Conclusion

Total

1 Intellectual

• Is able to gather and assimilate information from various sources 10

and perspectives.

• Is able to identify unstructured problems. 5

• Demonstrates creativity in approaches to work. 5

20

2 Personal

• shows awareness of personal performance and demonstrates willingness to improve. 5

• Meets the deadlines of given task and appreciates time

management. 5

• Is able to identify possible challenges in the tasks given. 5

• Shows flexibility and does not hesitate to try new approaches. 5

20


• Demonstrates understanding of organizational goals and working together. 5

• Presents information in written and numeric form clearly.

Depicts awareness of clear communication. 5

• Demonstrates listening skills and understands given instructions. 5

• Is sensitive to cultural differences while communicating. 5

20

4 Organizational

• Performs the given tasks in accordance with the established

procedure within the deadline. 5

• Understands and follows the quality standards of the 5

organizations.

10


• Is able to draw questions on financial information and data. 5

Directive 1.03



• Is able to analyze the responses on the questions raised. 5

10

6 Ethical Principles

• Comprehends importance of fundamental ethical principles. 5

• Shows sensitivity on ethical issues. 5

10

7 Commitment to the public interest

• Is aware of social responsibilities of accountants. 5

• Comprehends consequences of unethical behavior to the individual, to the profession and to the society at large. 5

10

Advice to improve areas where points are less than 50%. _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ Any other advice. _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _____________________________________________________________ ________________________________________________________

Signature of technical supervisor Signed by Trainee Student

Name ___________________________________ Name _________________________________

Membership No.___________________________ CRN___________________________________

Directive 1.03


ASSOCIATE TRAINEE ASSESSMENT


Total

1 Intellectual

• Analyzes information gathered from various sources and 5

perspectives.

• Analyzes the unstructured problems. 5

• Considers alternative approaches to getting the job done. 5

15

2 Personal

• Is eager to develop professional knowledge. 3

• Understands importance of high personal standards and accepts 3

feedback.

• Identifies professional commitments and apply skills of 3

effective time and resource management.

• Is able to identify possible challenges and solutions in the tasks 3

given.

• Displays openness to new ideas and opportunities. 3

15


• Works effectively in a team. 3

• Presents information in written and numeric form clearly. 2

Communicate ideas clear through oral communication.

• Communicates effectively using listening and questioning skills. 2

• Expresses logic and rational clearly while communicating. 3

• Communicates effectively in teams across all levels and produce 2

results.

• Takes difference of opinion positively. 2

• Displays sensitivity to cultural and language differences while 2

communicating.

• Actively participates in team by presenting ideas. 4

20

4 Organizational • Performs the given tasks in accordance with the established 2

procedure within the deadline.

• Follows the organizational quality standards and pays attention 2

to details.

• Gels well in teams, displays sensitivity to shortcomings of others 2

and understands importance of encouragement.

• Understands importance and ways of delegation of work. 2

• Understands the leadership traits. 2

10

Directive 1.03




• Applies skeptical mindset to critically assess financial 10

information and data presented.

• Identifies reasonable alternatives based on all relevant facts and 10

circumstances.

20


• Comprehends nature of ethics. 2

• Recognizes rules-based and principles-based approaches to 2

ethics.

• Applies fundamental principles of ethics. 3

• Adopts professional behavior in accordance with standards and 3

ethical best practice.

10


• Comprehends ethics within the profession and in relation to 2

social responsibility.

• Comprehends the role of ethics in relation to business and good 2

governance.

• Understands the relationship of ethics, law and regulations and 3

relationship with public interest.

• Comprehends consequences of unethical behavior to the 3

individual, to the profession and to the society at large.

10



Name ___________________________________ Name _________________________________


Directive 1.03


SENIOR ASSOCIATE TRAINEE ASSESSMENT


Total

1 Intellectual

• Researches information from a variety of sources and perspectives. 3

• Identifies solutions to unstructured, multifaceted problems. 3

• Applies reasoning, critical analysis, and innovative thinking to 4

solve problems.

10

2 Personal

• Demonstrates a commitment to learning. 2

• Sets high personal standards of delivery and monitor personal 2 performance, through feedback from others and through

reflection.

• Evaluates professional commitments and manages time and 2

resources to achieve professional commitments.

• Anticipates challenges and plan potential solutions. 2


10


• Displays cooperation and teamwork when working towards 2

organizational goals.

• Communicates clearly and concisely when presenting, discussing 2

and reporting in formal and informal situations, both in writing

and orally.

• Uses active listening and effective interviewing techniques. 2

• Uses negotiation skills to reach appropriate solutions and 2

agreements.

• Uses consultative skills to minimize or resolve conflict in a work 2

environment.

• Displays sensitivity to cultural and language differences in all 2

communication.

• Presents ideas and persuade others to provide support and 3

commitment.

15

4 Organizational • Undertakes work assignments in accordance with established 2

methodologies and within prescribed deadlines.

• Reviews work to determine whether it complies with the 2

organization’s quality standards.

• Uses effective people management skills to motivate others. 2

• Uses effective delegation skills to deliver work assignments. 2

• Applies leadership skills to influence others to work towards 2


10

Directive 1.03




• Applies a skeptical mindset to critically assess financial 10

information and other relevant data.

• Identifies reasonable alternatives to help reaching well-reasoned 10

conclusions based on all relevant facts and circumstances.

20


• Comprehends the nature of ethics. 5

• Comprehends the advantages and disadvantages of rules-based 5

and principles-based approaches to ethics.

• Applies fundamental ethical principles to ethical dilemmas. 5

• Applies the relevant ethical requirements to professional 5

behavior in compliance with standards.

20


• Explains the role of ethics within the profession and in relation 3

to the concept of social responsibility.

• Explains the role of ethics in relation to business and good 4

governance.

• Analyzes the interrelationship of ethics and law, including the 4

relationship between laws, regulations, and the public interest.

• Compares the consequences of unethical behavior to the 4

individual, the profession, and to society at large.

15

Advice to improve areas where points are less than 50%. _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ Any other advice. _______________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________ _____________________________________________________________ ________________________________________________________


Name ___________________________________ Name _________________________________


Directive 1.03


SENIOR ASSOCIATE TRAINEE STUDENT ASSESSMENT UPON COMPLETION OF TRAINING


Total

1 Intellectual

• Researches and evaluates information from a variety of sources 3

and perspectives and draw appropriate conclusions.

• Identifies, evaluates and recommends solutions to unstructured, 3

multifaceted problems.

• Applies innovative and critical thinking to solving problems. 4

10

2 Personal

• Applies the principles of lifelong learning. 2


reflection.

• Evaluates professional commitments and manage time and 2


• Proactively anticipates challenges and plan potential solutions. 2


10


• Promotes cooperation and teamwork when working towards 2


• Communicates clearly and concisely when presenting, discussing 2 and reporting in formal and informal situations, both in writing

and orally.



agreements.


environment.


communication.


commitment.

15

4 Organizational

• Undertakes work assignments in accordance with established 2




• Uses effective people management skills to motivate and 2

develop others.


• Demonstrates effective leadership skills. 2

10

Directive 1.03






• Identifies reasonable alternatives to reach well-reasoned 10


20





• Applies fundamental ethical principles to ethical dilemmas and 5

determines an appropriate resolution.



20





governance.





15



Name ____________________________________ Name _________________________________


Directive 1.03


MINIMUM STIPEND RATES EFFECTIVE FROM JULY 1, 2019

1. CAF Passed or equivalent thereto (Training period 3.5 years)

2. Four years Graduate degree holders from Specified Degree Awarding Institutes/ Four years degree holders

from any recognized Degree Awarding Institute with major in accounting or finance (Training period 3 years)

Criteria Rupees per month

On Commencement of Training 15, 800

On Passing any three papers of CFAP 17,300

On Passing all papers of CFAP/any three papers of CFAP and one MSA or equivalent 23,900

On Passing all the prescribed examinations required to become member of the Institute 47,700

3. Other Qualifications (Training period 4 years)


On Commencement of Training 11,100









Directive 1.03


TRAINING OUTSIDE PRACTICE

Directive 1.03

Directive 1.03


TRAINING OUTSIDE PRACTICE


1. Preamble 1

2. Definitions 1

3. Registration of training organizations 1

4. Member responsible for student affairs(MRS) 2

5. Technical Supervisor and Mentor 3

6. Contract, training period and stipend 4

7. Entitlement 5

8. Leaves, service break, working hours, overtime etc. 5

9. Transfer of training contract 6

10. Termination of training contract 7

11. Career progression, training area, assessment etc. 7

12. Statement of terms and conditions of engagement 11

13. Grievance mechanism 11

14. Compliance and counselling review 11

15. Non-compliance 12

16. Effective date 12

Annexures 13

Directive 1.03

TRAINING REGULATIONS AND GUIDELINES FOR TRAINING OUTSIDE PRACTICE 2016 OP - 1

1. PREAMBLE

In exercise of the powers conferred by Section 15 of the Chartered Accountants Ordinance, 1961 read with the Chartered Accountants Bye-Laws 1983, the Council of the Institute has approved the following regulations and guidance to govern the training of a student of chartered accountancy in entities other than professional firms authorized by the Institute as prescribed under the bye-laws.

2. DEFINITIONS

(1) In these Regulations, unless there is anything repugnant in the subject context:

(a) Bye-laws means Chartered Accountants Bye-laws 1983;

(b) Institute means the Institute of Chartered Accountants of Pakistan;

(c) Member means a member of the Institute;

(d) Mentor means a fulltime employee of a TO responsible for guiding the Trainee Students on the matters other than technical issues;

(e) Ordinance means Chartered Accountants Ordinance 1961;

(f) Prescribed means as prescribed under the bye-laws;

(g) Student means a person registered with the Institute as examinee;

(h) Technical Supervisor means a CPD compliant fulltime member employee responsible for development of technical competencies of Trainee Students;

(i) TO means Training Organization as defined in the bye-laws;

(j) Trainee-on-probation means a person who is registered with the Institute as student and has commenced probationary period of training with a TO; and

(k) Trainee Student means a Student whose contract of training has been registered with the Institute and whose period of training is not completed.

(2) Unless the context otherwise requires, all other terms and expressions used but not defined in these regulations shall have the same meaning as assigned to them in the Ordinance and Bye-Laws; and words importing the singular shall include the plural and vice versa.

3. REGISTRATION OF TRAINING ORGANIZATION

(1) Submission of proposal

The Institute on application by an entity may initiate the process for declaring an entity as TO. The document for processing a case for approval of an entity as a TO shall include:

(i) An expression of interest of the entity;

(ii) Necessary details with required documentation and explanation to demonstrate that pre-requisites for acting as a TO as per the Regulations are in existence; and

(iii) The application shall be submitted by a person authorized by the management of entity.

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(2) Pre-requisites for authorization as TO

An industrial, commercial or other entity shall be authorized as a TO if it complies with the following criteria:

(i) Business and operation of the organization is considered appropriate by the Institute for the purposes of professional development of trainees;

(ii) At least five members of the Institute are employed by the entity, and at least two members must have post qualification experience of five years or more;

(iii) It has nominated a CPD compliant Member, being full time employee, as Member Responsible for Student affairs (MRS); and

(iv) Any other condition as may be specified by the Council from time to time.

(3) Authorization Process

Authorization of a TO shall be processed as follows:

(i) The Institute shall conduct an evaluation of the proposal through visits and/or review of documents and information obtained;

(ii) Upon completion of the formalities for authorization as training organization, the Institute shall authorize the entity to act as TO and train students;

(iii) A certificate to the effect that the organization is an Authorized TO shall be issued by the Institute;

(iv) Cases of entities not complying with the prescribed criteria shall be deferred and deficiencies shall be conveyed to the entity for removal of such deficiencies;

(v) If the deficiencies are removed after a period of six months the entity shall be required to re-apply, otherwise a statement confirming that the deficiencies have been removed would suffice.

(4) Subsequent failure to meet the pre-requisites for authorization

(i) In case a TO falls short of the pre-requisites for authorization subsequently, the TO shall inform the Institute within 30 days for appropriate direction.

(ii) The Institute shall have the power to grant waiver or relaxation from any condition for a period not exceeding one year. The reasons for granting waiver or relaxation shall be recorded in writing and communicated to the concerned TO.

(iii) TO shall continue imparting training till further decision.

4. MEMBER RESPONSIBLE FOR STUDENT AFFAIRS(MRS)

TO shall nominate in each office one MRS who shall be the focal person in the office of the TO and shall assume the responsibility of:

(i) signing training contracts and timely submission thereof to the Institute;

(ii) intimating nomination of Technical Supervisors and Mentors to the Institute;

(iii) intimating allocation of Trainee Students among the Technical Supervisors and Mentors to the Institute;

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(iv) maintenance of training records specified in these regulations and as may be specified by the Institute from time to time;

(v) coordinating with the Technical Supervisors, Mentors, Students, Trainee Students and the Institute; and

(vi) ensuring compliance with the regulations.

5. TECHNICAL SUPERVISOR AND MENTOR

(1) Duties of Technical Supervisor

A TO shall be required to appoint a Technical Supervisor for each Trainee Student who shall:

(i) at the time of induction, arrange orientation and communicate the attributes on which a Trainee Student would be assessed under these regulations;

(ii) ensure proper on-the-job training and practical experience as mentioned in these regulations;

(iii) monitor the career progression plan and assess the progress annually. The outcome of assessment should be in recorded form;

(iv) provide necessary guidance to the Trainee Students for improvement in the areas identified during annual assessments; and

(v) as far as practical, avoid overtime work by Trainee Students, to allow them adequate time for studies. Provided that where overtime is unavoidable, the Trainee Student shall be suitably compensated in the manner specified in these regulations.

(2) Duties of Mentor

A TO may appoint mentors for the Trainee Students who may:

(i) act as a trusted, caring and responsible guide who establishes a positive and personal relationship with the Trainee Students and maintains regular interaction and consistent support;

(ii) provide career guidance and help the Trainee Students to develop broader life management skills; and

(iii) guide the Trainee Students in accessing solutions and resources which the Trainee Students may need, rather than to provide those solutions and resources.

Explanation: Wherever reference to mentor is given in these regulations, it is clarified that these are only applicable when the TO has appointed the mentor.

(3) Allocation of Trainee Students

The allocation of Trainee Students to Technical Supervisors and Mentors shall be in the following manner:

(i) TO shall allocate its Trainee Students among the Technical Supervisors for a period preferably not less than six months.

(ii) Preferably, allocation of Trainee Students shall be to such Technical Supervisors to whom the Trainee Students are functionally reporting.

(iii) Allocation of Trainee Students to mentors should be in accordance with the policy of the TO. A mentor shall not be a person to whom the Trainee Student reports functionally.

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6. CONTRACT, TRAINING PERIOD AND STIPEND

(1) Contract

(i) There shall be a written contract, on the prescribed format, between the Trainee Students and their Training Organization.

(ii) The contract shall be executed after completion of the probationary period of training and shall be sent to the Institute for registration within the prescribed period and in the manner prescribed under the Bye-Laws.

(iii) In suitable circumstances the Institute shall have the power to condone delay in registration of training contract for maximum of thirty days.

(iv) Delay in submission of contract for more than thirty days shall be treated as non-compliance with these regulations.

(2) Period of training

The training period shall vary according to the qualification of the Trainee Student at the time of commencement of training, as follows:

Qualification Period of Training

(i) CAF passed or equivalent thereto 3.5 years

(ii) Four year Graduate / Post Graduate from Specified Degree Awarding Institutes (SDAI)

3 years

(iii) *Four year Graduate / Post Graduate from any recognized degree awarding Institute with major in accounting or finance

3 years

(iv) *All other Graduates including 14 years associate degree holders

4 years

(3) Probationary period

(i) Trainee Student shall be required to complete a probationary period as prescribed under the Bye-Laws.

(ii) The engagement of a student as a Trainee-on-probation shall be properly documented.

(iii) The Student shall intimate his joining to the Institute within two weeks from the date of joining. A registration as Trainee-on-probation shall be effected upon such application and payment of prescribed fee. The Institute shall send a list of such Trainee-on-probation to the TO on monthly basis.

(iv) TOs shall keep record of satisfactory performance during probationary period.

(v) During the probationary period, the trainee shall be eligible for minimum stipend applicable for Trainee Students as may be specified by the Council.

Provided that this clause shall not apply to an employee under employment for more than three months in TO outside practice.


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(4) Stipend/Salary

The stipend/salary shall be paid through banking channels and shall not be less than the minimum stipend specified by the Institute.

7. ENTITLEMENT

A TO outside practice shall be entitled to train five Trainee Students per member employed fulltime by the TO.

8. LEAVES, SERVICE BREAK, WORKING HOURS, OVERTIME ETC.

(1) Leave

(i) TOs shall allow leave of absence for examination and other purposes in accordance with bye-law 106(1)(i) during the training period in lieu of which no further training shall be required.

(ii) TOs may also allow leaves during the training period against overtime as specified in these regulations in lieu of which no further training shall be required.

(iii) TOs may also allow additional leave of absence of up to sixty days due to sickness, examinations or any other suitable reason in lieu of which Trainee Student shall be required to undergo further training for an equivalent period. TO shall intimate such cases to the Institute upon completion of training contract.

(iv) All further leaves shall be subject to prior approval of the Institute and in lieu thereof the Trainee Student shall be required to undergo further training for an equivalent period.

(v) In calculating the number of leaves availed weekends and public holidays falling at the start and the end of leave period shall not be counted.

(2) Service breaks

(i) The training period shall be completed without any service break except in the following circumstances, under intimation to the Institute:

(a) For any reason deemed appropriate by TO, the service break of up to six months shall be allowed; during the full tenure of the training.

(b) Female Trainee Students shall be eligible for a break in their training period of up to one year on account of marriage and/or maternity during the full tenure of training.

(ii) Service break for a period more than specified in this regulation shall be permitted with the prior approval of the Institute.

(iii) TO may not pay any stipend during such period(s) of absence.

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(3) Working hours and overtime

(i) During the training period a Trainee Student shall be required to accumulate working hours computed on the basis of 1,800 hours per year of training. For computing working hours standard recess time as per policy of TO shall be excluded.

(ii) The timing and working days shall be specified by the TO. Provided that it ensures that Trainee Student completes 1800 hours per year of training.

(iii) In case working hours exceed the number of hours specified in (i) above the TO shall allow one day leave in lieu of each eight hours.

(iv) Any unadjusted excess hours shall be compensated by way of overtime payment. The rate of overtime payment shall not be less than the rate computed on the basis of latest monthly stipend/salary of the individual Trainee Student.

9. TRANSFER OF TRAINING CONTRACT

(1) The training contract may be transferred:

(i) by mutual agreement between the TO and the Trainee Student;

(ii) in case TO ceases to exist or ceases to be a TO; or

(iii) when the number of Trainee Students with the TO exceeds the entitlement of TO under these regulations.

(2) Transfers by mutual agreement

(i) In the event of transfer of training contract by mutual agreement between the TO and the Trainee Student, the TO transferring the Trainee Student shall send to the Institute a copy of no objection certificate issued to the Trainee Student within thirty days of the issuance thereof.

(ii) The Trainee Student may apply to the TO for transfer of training contract and issuance of no objection certificate.

(iii) TO shall not require more than three month notice period for issuance of no objection Certificate.

(3) Transfers in case TO ceases to exist or ceases to be a TO

Trainee Students of a TO, which ceases to exist or ceases to be a TO due to any reason, shall enter into fresh contract for the residual period, with another TO within three months from the date of such cessation. Such fresh contracts shall be sent to the Institute for registration and shall be registered by the Institute without any registration fee.

(4) Transfers when the number of Trainee Students exceeds the entitlement

If entitlement of a TO falls short of number of its Trainee Students, due to any reason including death, resignation, retirement and suspension of membership of member employee of a TO, it shall immediately inform the Institute of the fact. The Institute may direct the excess Trainee Students, most recent in order of their registration:

(i) to enter into fresh contract for residual period with any other TO within a given time period for which no registration fee shall be charged by the Institute; or

(ii) To continue with the same TO for the residual period.

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10. TERMINATION OF TRAINING CONTRACT

(1) TO may terminate the training contract if a Trainee Student:

(i) is guilty of:

(a) misconduct;

(b) misbehavior; or

(c) breach of any of the provisions of the Training Contract; or

(ii) fails to progress satisfactorily as per the criteria established by TO.

(2) The following procedures shall be followed, if TO is satisfied that a Trainee Student has

prima facie committed any act(s) as mentioned in (1) above:

(i) TO shall issue a show-cause notice to the Trainee Student under a registered cover or

through recorded mode of delivery, on the Trainee Student’s address registered with

the TO.

(ii) If on receipt of response of the Trainee Student, the TO is not satisfied, it shall grant

the Trainee Student an opportunity of hearing.

(iii) In case the Trainee Student does not respond or does not attend the hearing, he shall

be informed about the ex parte proceedings in the matter.

(iv) If the TO is satisfied, that the Trainee Student has committed any act(s) as mentioned

in (1) above, it may terminate, the training contract of the Trainee Student under

intimation to the Institute along with a ‘report on termination’ specified under these

regulations.

(v) All correspondence made in this regard by the TO or the Trainee Student shall be

through recorded mode of delivery with proof of delivery.

(vi) In the event of professional misconduct by a Trainee Student, falling under schedule

III of the Ordinance, the TO shall report the matter to the Institute.

(vii) A Trainee Student aggrieved by the termination of his training may prefer an appeal

to the Council as prescribed under bye-law 107.

11. CAREER PROGRESSION, TRAINING AREA, ASSESSMENT ETC

(1) Career Progression Plan

(i) The progression of a Trainee Student shall be through the following roles or through any suitable alternate designations with prior intimation to the Institute.

(a) Assistant trainee

(b) Associate trainee

(c) Senior associate trainee

(ii) There shall be a Career Progression Plan (CPP) for Trainee Students which may contain the following:

(a) Qualification or achievement in examinations of the Institute required by TO for each role, subject to the minimum conditions applicable under the bye-laws and under these regulations;

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(b) Minimum period of training required for each role; and

(c) Minimum achievement required for each role in the periodic assessment of professional skills and professional values ethics and attitude.

(iii) Policy on CPP shall be submitted to the Institute within three months from the date of authorization as TO.

(iv) TO may amend the policy on CPP any time it deems necessary under intimation to the Institute.

(2) Training areas – Technical Competencies

TOs should have a formal mechanism to support the development of technical competencies through on-the-job training. It is expected that the TO shall provide the Trainee Students practical exposure in the technical areas given in this regulation. The recommended training areas and allocation of training period to various training areas are as follows:

Training area Recommendatory Period allocation

(i) Accounting, financial reporting, internal audit and risk management

Not less than 50%

(ii) Taxation and corporate law Remaining

(iii) Treasury, financial management, supply chain management and information technology

(iv) Any other area deemed appropriate by TO (such as marketing, human resource etc.)

Not more than 20%

(3) Training areas – Professional skills

The training outcomes relating to each type of professional skill shall be as follows:

(i) Intellectual

(a) Research and evaluate information from a variety of sources and perspectives and draw appropriate conclusions.

(b) Identify, evaluate, and recommend solutions to unstructured, multifaceted problems.

(c) Apply innovative and critical thinking to solving problems.


(ii) Personal

(a) Apply the principles of lifelong learning.

(b) Set high personal standards of delivery and monitor personal performance, through feedback from others and through reflection.

(c) Evaluate professional commitments and manage time and resources for their achievement.

(d) Proactively anticipate challenges and plan potential solutions.

(e) Display openness to new ideas and opportunities.


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(iii) Interpersonal and communication

(a) Promote cooperation and teamwork, working towards organizational goals.

(b) Communicate clearly and concisely when presenting, discussing and reporting formal and informal situations, both in writing and orally.

(c) Use active listening and effective interviewing techniques.

(d) Use negotiation skills to reach appropriate solutions and agreements.

(e) Use consultative skills to minimize and resolve conflict in a work environment

(f) Display sensitivity to cultural and language differences in all communication.

(g) Present ideas and persuade others to provide support and commitment.


(iv) Organizational

(a) Undertake work assignments in accordance with established methodologies and within the prescribed deadlines.

(b) Review work to determine whether it complies with the organization’s quality standards.

(c) Use effective people management skills to motivate and develop others.

(d) Use effective delegation skills to deliver work assignments.

(e) Demonstrate effective leadership skills.


(4) Training areas – Professional values, ethics and attitude

Training outcomes relating to professional values, ethics and attitude shall be as follows:

(i) Professional skepticism and professional judgment

(a) Apply a skeptical mindset to critically assess financial information and other data relevant to the role of a professional accountant.

(b) Identify and evaluate reasonable alternatives to reach well-reasoned conclusions based on all relevant facts and circumstances.


(ii) Ethical principles

(a) Explain the nature of ethics.

(b) Explain the advantages and disadvantages of rules-based and principles-based approaches to ethics.

(c) Apply the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior to ethical dilemmas and determine an appropriate resolution.

(d) Apply the relevant ethical requirements to professional behavior and compliance with standards


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(iii) Commitment to the public interest

(a) Explain the role of ethics within the profession and in relation to the concept of social responsibility

(b) Explain the role of ethics in relation to business and good governance

(c) Analyze the interrelationship of ethics and law, including the relationship between laws, regulations, and the public interest;

(d) Compare the consequences of unethical behavior to the individual, to the profession, and to society at large.


Explanation: Learning outcomes at the intermediate level relate to work situations that are characterized by moderate levels of ambiguity, complexity and uncertainty.

(5) Assessment of professional development by TO

(i) The assessment of professional skills, values, ethics and attitude shall be carried out by TOs as nearly as practical on the format attached with these regulations.

(ii) The assessments shall be done within three months before or after completion of each year of training and finally after the completion of training.

(iii) The Institute may also assess professional skills, values, ethics and attitude through prescribed examinations.

(iv) Copy of the assessment carried out by TO shall be provided to the student and the same shall be shared with the Institute along with completion certificate.

(6) Record keeping of training by the Trainee Students

(i) Trainee Students shall prepare the record of their training. The same shall be submitted to TO periodically as per policy of the TO.

(ii) The TO shall specify the records to be maintained by its Trainee Students and the TO itself. The following minimum record shall be prepared by the Trainee Student:

(a) Monthly time sheet duly authenticated as per TO’s policy (i) Date (ii) Nature of assignment based on the major category of technical

competency required to perform the assignment

(b) Annual/completion record duly discussed and seen by Technical Supervisors

(i) Major category of technical competency covered during the year/period

(ii) Value of experience gained

(iii) New exposure or advancement in previous exposure

(iv) The level of management with whom communicated and dealt

(v) Any ethical issue or dilemma faced

(vi) Comments of Technical Supervisor

(iii) TOs shall be responsible for custody of original record submitted by the Trainee Students.

(iv) TOs shall be responsible for keeping record of annual assessments as specified in these regulations.

(v) The annual record shall be submitted to the Institute within three months from the date of completion of respective year of training.

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(7) The Institute shall perform a periodic review of the training record kept by the training

organization and Trainee Students.


The Institute may offer an online compulsory course on professional values, ethics and

attitude. The Institute may consider similar in-house courses offered by TOs as equivalent

to the Institute’s course.

(9) Certificate of Completion

On completion of the training every TO shall send a certificate of completion to the

Institute within 15 days.

12. STATEMENT OF TERMS AND CONDITIONS OF ENGAGEMENT

(1) TO shall apprise the Trainee Students in respect of policies and procedures set forth by TO.

(2) Such policies and procedures shall be in documented form duly acknowledged by the

Trainee Student and to include the following: :

(i) Mentor and allocation of trainee students among the mentors

(ii) Leaves and service breaks

(iii) Office timing and overtime compensations

(iv) Transfers and procedure for issuance of no objection certificate to enable students to join other TO

(v) Career Progression

(vi) Trainee Student rotation in different areas

(vii) Record to be prepared by trainee students

(viii) Grievance mechanism

13. GRIEVANCE MECHANISM

(1) TOs shall prepare and implement a policy that deals with grievances of Trainee Students and nominate a person with whom Trainee Students should contact in this regard. Such policy shall be shared with the Trainee Students.

(2) A copy of the policy shall be filed with the Institute.

14. COMPLIANCE AND COUNSELING REVIEW

(1) The Institute shall have the right to visit the premises of the TO.

(2) The objectives of the visits shall include:

(i) To give and take feedback on training program of the TO;

(ii) To assist TO in performing its responsibilities towards training of Trainee Students; and

(iii) To review documents necessary to ensure compliance with the Training Regulations.

(3) The visits of representatives of the Institute shall be undertaken on the date mutually agreed between the Institute and TO.

(4) A report of the visit shall be made and shared with TO.

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15. NON-COMPLIANCE

(1) If default is made in complying with the requirement of these regulations, the Institute may;

(i) direct the TO in default to comply with the requirement within a specified period;

(ii) suspend authorization of TO in default for a specified period; or

(iii) cancel the authorization of TO in default.

(2) A TO aggrieved by the decision of the Institute may prefer an appeal to the Council.

16. EFFECTIVE DATE

This directive shall be effective from May 09, 2016 .

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ANNEXURES

Particulars Form

Forms

Application for registration as Training Organization U - Details of key management personnel U/A - Details of other training offices U/B - Declaration U/C - Undertaking U/D

- Certificate of Approval as Training Organization

Statement of particulars for registration as trainee student Q

Training Contract R

Deed of amendment of training contract R/A

Certificate of completion of training S

No Objection Certificate T

Report on termination of training contract ZB

Sample documents for guidance purposes

Sample daily record -

Sample annual record -

Sample assessments of trainee -

Sample record of satisfactory performance during the probationary period -

Sample career progression plan -

Others

Minimum Stipend -

Directive 1.03


FORM – U

APPLICATION FOR REGISTRATION AS TRAINING ORGANIZATION

To: The Directorate of Education and Training The Institute of Chartered Accountants of Pakistan Chartered Accountants Avenue Karachi – 75600.

DETAILS OF PROPOSED TRAINING ORGANIZATION (TO)

Name __________________________________________________________________________________________________________

Registered Address ______________________________________________________________________________________________

_______________________________________________________________________________________________________________

City / Town ____________________________________ Country__________________________________________________________

Phone _______________________________________ Fax No ___________________________________________________________

E-mail_______________________________________ Website __________________________________________________________

Number of Employees who are members of ICAP___________

DETAILS OF MEMBER RESPONSIBLE FOR STUDENT AFFAIRS (MRS)

Name: _________________________________________________________________________________________________________

Membership No. ______________________________________ Membership Date: __________________________________________

Phone _________________________________ Fax ________________________________ E-mail:_____________________________

PROFILE AND BRIEF ON BUSINESS AND OPERATION OF THE ENTITY

_______________________________________________________________________________________________________________

_______________________________________________________________________________________________________________

_______________________________________________________________________________________________________________ (Please attach Memorandum and Articles of Association and use separate sheets to explain business and operations)

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___________________________________________________ Name: _________________________________________________

Signature

On behalf of _____________________________________ Designation: (Please mention the name of Training Organization) Place: _________________________________________________

Office Seal:________________________________________ Date: __________________________________________________

Note: Please also fill in the annexures A to D


File No.

Checked By ________________________________________________________________ Date ________________________________

Application endorsed by Appraisal consultant (if required) ________________ Date _______________________________

Put up to Executives of the Institute ______________________________________ Date ________________________________

Registered / NOT Registered________________________________________________ Date ___________________________________

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ANNEX A to FORM - U

DETAILS OF KEY MANAGEMENT PERSONNEL

Details of Head of key departments

S # Name

Member-

ship

Number

(If any)

Member-

ship Date

Years of Post Qualification

experience as Member Location of

Training

Office

Individual

student’s

entitlements In Practice

In other

Discipline

Details of MRSs

S # Name of MRS

(ACA/FCA)

Member-

ship

Number

Member-

ship date

Years of Post

Qualification experience

as Member Location of

Training

Office

CPD

compliance

status In Practice

Outside

practice

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Details of Employees who are ICAP members

S # Name

Membership

Number Membership

date

Years of Post

Qualification

experience

Location of

Training Office

Details of Technical Supervisors who are ICAP members

S # Name Membership

Number

Membership

date

Years of Post

Qualification

experience

Location of

Training

Office

CPD

compliance

status

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ANNEX B to FORM - U

DETAILS OF OTHER TRAINING OFFICES Name of Training Organization: _____________________________________________________________________________________

Address of Training Office: _________________________________________________________________________________________

City / Town: ________________________________________________ Country: _____________________________________________

Phone _________________________________ Fax ________________________________ E-mail:______________________________

Name of Nominated MRS: _________________________________________________________________________________________

Membership No: ____________________________________Membership Date:_____________________________________________

Phone _________________________________ Fax ________________________________ E-mail:______________________________

_______________________________________________________________________________________________________________

Number of member of ICAP in training office____________________________________________________________________

Number of Technical Supervisors in training office________________________________________________________________

Note: Please fill in separate Form for each training office.

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Annex – C to Form U

D E C L A R AT I O N

It is hereby declared that _______________________________________ will abide by all terms and conditions (name of Training Organization)

given in approved Training Regulations and Guidelines and other provisions of CA Bye-Laws / Directives /

Instructions made by or on behalf of the Council of the Institute from time to time in respect of Students and

Training Organization.

It is further undertaken that ________________________________________ agrees to monitoring visits by the

(name of Training Organization) Institute’s consultant / representative and will implement recommendations resulting from such visits and the

Member Responsible for Student Affairs shall inform immediately to Institute of Chartered Accountants of

Pakistan if the Training Organization falls short of prescribed authorization criteria.

Place: __________________________________________

Signature: ____________________________________________

Date: __________________________________________

Name: ____________________________________________

Designation: ____________________________________________

Office Seal

On behalf of ____________________________________________

(Please mention the name of Training Organization)

Note: This declaration is to be on the letterhead of the Training Organization without typing Annex C on it.

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Annex – D to Form U

U N D E R TA K I N G

I _______________________________________Membership No________________ designated as______________________________

Member Responsible for Student Affairs (MRS) by _____________________________________________________________________

________________________________________ for its Training Office at __________________________________________________

Under bye-law 102 of the CA Bye-laws 1983 do hereby undertake that I have thoroughly read and have the

knowledge of the relevant Sections of the Ordinance, Bye-Laws, Training Regulations and Guidelines, Institute’s

schemes of education and Directives of the Council. I have the ability to advise, counsel, evaluate, motivate and

provide direction to Students; I have the ability to assume the responsibility of ensuring that annual evaluations

are made and also assume the responsibility of maintenance of the records strictly as prescribed in the Training

Regulations and/or the Guidelines, or otherwise as may be directed by the Committee from time to time. I shall

comply with all the future directives and requirements to this effect and have full awareness of the ethics

governing the meaning, purview and obligations of an MRS under bye-laws and Training Regulations.

Signature: ____________________________________________

Place: _________________________________________________

Date: _________________________________________________

Office Seal

Note: This undertaking will be given on the letterhead of the Training Organization without typing Annex D on it.

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TO-Number.




TO name and Office

is an approved

Training Organization Outside Practice

of The Institute of Chartered Accountants of Pakistan

Director Education, Training and CPD Date: _________________________

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Form ‘Q’

STATEMENT OF PARTICULARS FOR REGISTRATION

AS TRAINEE STUDENT BYE-LAW 98 (1) & (2)

1. Name of Trainee Student:

2. Father’s Name:

3. Date of Birth Nationality:

4. NIC No:

5. Qualifications:

Educational Qualification (Academic)

Examinations Passed

Month & Year of Exam

Grade/Div Board / University/

Institute

Professional Qualification

(eg CA PIPFA, ACCA, CIMA, ACMA, MBA etc)

6. CRN and date of issuance _______________________________________________________________________

7. Addresses (Communication Address) ______________________________________________________________

_____________________________________________________________________________________________________________

(Permanent Address) ___________________________________________________________________________

_____________________________________________________________________________________________________________

8. Name of MRS_________________________________________________________________________________

Name of Training Organization __________________________________________________________________

Address _____________________________________________________________________________________

____________________________________________________________________________________________

9. Present Status with CRN ________________________________________________________________________

Continued on reverse

IN CASE OF RE-REGISTRATION UPON TRANSFER TO

- -

Affix a recent Photograph of (1”x1”) which should not be more than 3 months old

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ANOTHER TRAINING ORGANIZATION UNDER BYE-LAW 103 (I)

a. CRN:

b. Name of Previous MRS:

c. Name of Previous Training Organization:

d. Period Served From: to

e. Details of leave availed

f. No objection certificate: Yes No

I declare that the particulars given above are true and correct to the best of my knowledge and belief

Date:

Place:

Endorsement by the MRS

“I certify that the above particulars furnished by the Trainee Student are correct. He/She has completed the probationary period from__________________________to__________________________successfully”.

Date:

Place:

(Seal of Office)

ATTACHMENTS 1. Birth certificate and Matriculation Certificate duly attested by MRS/ Member of Training Organization

(not required in case of transfer). 2. Attested copy of certificate in respect of educational and professional qualifications with photocopies

(not required in case of transfer). 3. Copy of NIC 4. Photograph size 1”x1” to be pasted on this form and one attested (by MRS / Member) copy to be attached.

Study Sick Others Total

Signature of Trainee Student

Signature of the MRS

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FORM ‘R’

TRAINING CONTRACT

(Bye-Law 99) Stamp values

applicable in each

province of Pakistan

at time of execution

of contract

1. The parties to this Training Contract are:

Name of Student __________________________________, referred to herein as the ‘Trainee Student’

Address ____________________________________________________________________________

_________________________________________________________________________________________________

Name of MRS_______________________________________________, referred to herein as the ‘MRS’

Name of Training Organization__________________________________________________________

Address_____________________________________________________________________________

_________________________________________________________________________________________________ 2. The person named below shall be responsible for the Trainee Student’s personal and professional

development:

(iii) Name of Technical Supervisor_____________________________________________________

(iv) Name of Mentor, if any _________________________________________________________ 3. This Training Contract governs the Approved Training to be provided to the Trainee Student by an

Authorized Training Organization under the Chartered Accountants Bye-Laws, 1983 (as amended from time to time) for the purpose of equipping the Trainee Student with the technical competencies, professional skills and professional values, ethics and attitude necessary for membership of the Institute of Chartered Accountants of Pakistan (referred to hereafter as “the Institute”).

4. 4.

*a This Training Contract begins on __________ the ____day of __________ in the year _________and shall continue until the Trainee Student has completed ___years of Approved Training.

*b In case of transfer of Trainee Student from one Training Organization to another, the residue training period begins on __________ the ______day of __________ in the year ____________ and shall continue until Trainee Student has completed _________ year(s) _________ month(s) _______ day(s) of remaining Approved Training.

* (In (a) or (b) write NA whichever not applicable.)

Directive 1.03


5. This Training Contract shall be subject to the provisions of the CA Ordinance, Bye-Laws and the Training

Regulations and Guidelines made by the Council of the Institute from time to time, whether or not such provisions and or regulations came into force before or after the commencement of this Training Contract and the parties agree to comply with such provisions in all respects. The parties hereby acknowledge their mutual commitment to provide an effective training on the one hand and a proper contribution to the work of the MRS’s Office on the other.

6. The Trainee Student is required to, under this Training Contract, carry out work at his Training Organization and at other locations and other organizations as specified by or under the authority of the MRS or his Training Organization, provided that such service will count as Approved Training within the regulations.

7. The Trainee Student agrees that, during the existence of this Training Contract and for any period following its expiry or termination during which eligibility to qualify for admission or to be admitted as an Associate of the Institute continues, the Trainee Student will: a. use every effort to further the objects of the Institute; b. observe and uphold the ethical and professional standards of the Institute; c. provide promptly and willingly all possible information and assistance if asked to do so by

the Institute in the pursuance of its duties; d. properly carry out the duties lawfully assigned by his Training Organization and diligently

pursue the studies required of Trainee Students of the Institute; e. maintain the confidential nature of the affairs of the Training Organization and its clients

including the names and the nature of the business of such clients; f. not practice as a public accountant; g. not engage in any other business or occupation; and h. regularly maintain records of Approved Training in such form as may be required by the

Institute.

8. The Training Organization agrees that: a. it will provide the Trainee Student with Approved Training to the best of his ability for the

purposes set out in clause 3 of this training contract; b. it will ensure compliance of all Bye-Laws, Training Regulations, Council Directives and other

provisions / instructions issued from time to time by the Institute, in respect of Trainee Student training and administration;

c. it shall pay the monthly stipend and provides other compensation to its Trainee Students as may be specified by the Institute from time to time during the period of training;

d. it will monitor the career progression plan and assess the progress annual in recorded form. e. provide the name of any person nominated as Technical Supervisor to replace the person

named in clause 2 of this Training Contract.

9. This Training contract may be terminated: a. by mutual agreement between the parties; or b. As prescribed in Bye-Law 107 of CA Bye-Laws 1983

10. This Training Contract may not be altered or amended except as provided for in Bye-Law 100 of CA Bye-Laws 1983.

In witness whereof this Training Contract has been duly executed this __________ the ____day of __________ in the year _________.

Directive 1.03


Trainee Student’s Signature_____________________________________

In the presence of:

Signature of Witness: __________________________________________ Name _______________________________________ CNIC No.

Place______________________________________________

MRS’s Signature________________________________________________ Seal of Office___________________________________________________ In the presence of: Signature of Witness: __________________________________________ Name _______________________________________ CNIC No.

Place______________________________________________

FOR OFFICE USE ONLY

CRN_______________________________________________ Date___________________________________________

Entered in the Register of Trainee Students

___________________________________________________ Office Seal Signature

INSTRUCTIONS FOR COMPLETION AND FORWARDING OF THIS FORM a. Three copies of this contract are to be completed and forwarded to the Institute within 30 days of

completion of the probation period (2 months from the date of Trainee Student’s joining the Training Organization).

b. Special Adhesive Stamps are to be affixed to original and duplicate copies only of the Training Contract. c. Form ‘Q’, duly completed in all respect is to accompany this Training Contract along with all attachments

mentioned therein. d. The correcting fluid shall not be used. e. Bank Credit Voucher/Pay Order/Demand Draft for Registration Fee is to be forwarded with this Training

Contract. f. All Registration documents are to be forwarded under a covering letter of the Training Organization. g. Witness to Trainee Student and MRS’s Signature should be of male adults.

Note: Specified Training Period: (1) CAF Passed or equivalent thereto 3.5 years (2) Four year Graduate / Post Graduate from Specified Degree Awarding Institute (SDAI) 3 years (3) *Four year Graduate / Post Graduate from any recognized Degree Awarding Institute with major in accounting or finance 3 years (4) *All other Graduates including 14 years associate degree holders 4 years

-

-

-

-


Directive 1.03


ANNEX A to FORM - R ON RS. 50/- STAMP PAPER

DEED OF AMENDMENT OF TRAINNG CONTRACT (For Service breaks)

This deed of amendment of training contract made and executed this________________________________________________

BETWEEN:

M/s. ___________________________________________ and _________________________________ CRN. _____________________

WHEREAS the above parties have signed the training contract dated__________________________________________________

Registered with the Institute on ____________________________________________________ for ________________________ years.

from________________________________________________________to____________________________________________under

Bye-law 99 of Chartered Accountants Bye‑Laws, 1983.

AND WHEREAS the both parties decided to amend the training contract to the extent that the completion date has been

changed to____________________________________________________________________due to service break to be availed

from________________________________________to________________________________________ ( __________ days) by

________________________ (Trainee Student) in accordance with the directives of the Institute.

NOW THEREFORE this deed of amendment of training contract witnessed to read this as under:-

“The Completion date of the training contract has been revised from _______________________ to ______________________ .

“That as amended as aforesaid the other terms and conditions in training contract dated ____________________ shall remain in

full force and effect.”

Witnesses: 1.___________________________ ________________________________________

Signature of the Trainee Student

2.___________________________ ________________________________________

Signature and Name of MRS

Name of Training Organization

(Execution date)

(Trainee Student) (Training Organization)

(Original date) (New date)

Directive 1.03


ON TRAINING ORGANIZATION’S LETTERHEAD (FORM ‘S’)

The Director Education and Training


CERTIFICATE OF COMPLETION OF TRAINING

I certify that the Trainee Student named below served as Trainee Student under registered training contract with me for the period stated in accordance with the bye-laws, of the Institute of Chartered Accountants of Pakistan and that his/her progress was satisfactory.

MRS

TRAINEE STUDENT

Name: _______________________________________

Father’s Name : ________________________________

PERIOD OF TRAINING SERVED (Including approved excess leave period)

IN FIGURES

From To

D M Y D M Y

IN WORDS

From _________________________________To ________________________________________

LEAVE AVAILED

Normal Excess * Total leave availed

* Excess leave approved by ICAP’s letter No. __________________________ dated __________________________

IN CASE OF RE-REGISTRATION UPON TRANSFER FROM ANOTHER TRAINING ORGANIZATON OR MRS

Previous MRS:_________________________________

TO: _________________________________________

CRN No. _____________________________________


Leave availed: Days

Previous MRS: _________________________________

TO: _________________________________________

CRN. _________________________________________


Leave availed: Days

Date: __________________________________________

Place: _________________________________________

c.c Mr./Ms. ________________________________

Signature of MRS

* This Certificate must not be issued until the excess leave has been approved by the Institute, if required, and the Trainee Students has served the period in lieu of excess leave in the training organization.

NAME AND ADDRESS OF TRAINING ORGANIZATION

ICAP CRN

Seal

Directive 1.03


FORM ‘T’

NO OBJECTION CERTIFICATE

[Bye-Law 103(1) & (2)]

I______________________________________________of__________________________________________

_________hereby certify that Mr/Ms____________________________________________served as a Trainee

Student under me in accordance with the Chartered Accountants Bye-Laws, 1983 for a period of________

years(s)________ month(s) and________ days(s) from _____________________ to_____________________

under CRN________________ and that I have no objection in transferring his/her Training Contract to another

registered training organization.

I hereby certify that during the above mentioned period the trainee student was given leave for________ days.

I further certify that during the above mentioned period his / her work was satisfactory. The trainee student has also served with:

Name of Training Organization_____________________________________________________________________________________

Name of MRS___________________________________________________________________________________________________

From___________________________________ to______________________________________ CRN___________________________

Date___________________________________ and availed ____________________days leave.

Place___________________________________ Date___________________________________

Office Seal _____________________________________________

Signature of MRS

Directive 1.03


FORM ‘ZB’

REPORT ON TERMINATION OF TRAINING CONTRACT UNDER BYE-LAW 107(I) OF THE CA BYE-LAWS, 1983

Name of Trainee Student__________________________________________________________________________________________

CRN___________________________________________________________________________________________________________

Period ___________________________________________________ Date of________________________________________________

Commenced on________________________________________Termination________________________________________________

Name of MRS____________________________________________________________________________________________________

Name of Training_________________________________________________________________________________________________

Organization____________________________________________________________________________________________________

Address of TO___________________________________________________________________________________________________

_____________________________________________________________________________________________________________________

MRS’s Report

_____________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________ Certified Copies of Following Documents Enclosed: 1. Show Cause Notice 2. Trainee Student’s Reply to Show Cause Notice 3. Hearing Proceedings 4. Any other relevant correspondence /papers in respect of the matter Date______________________________________________ _____________________________________________

Signature & Seal of Office

Directive 1.03


For THE INSTITUTE Use Only

Actions Date

1. Documents Checked ____________________________________________________

2. Termination Recorded ____________________________________________________

3. Letter of acknowledgement to MRS and copy to Trainee Student issued ____________________________________________________

4. Receipt of Appeal from Trainee Student (if any) ____________________________________________________

5. Reference of Appeal to the Council ____________________________________________________

6. Decision of the Council ____________________________________________________

_____________________________________________________________________________________________________________________________ ___________________

_____________________________________________________________________________________________________________ ___________________________________

_____________________________________________________________________________________________________________________________ ___________________

Date _____________________________________ ____________________________________________________ Signature

Directive 1.03


Daily Record Trainee Student Name_______________________________________________CRN_________________________________________

Trainee Student Role________________________________________________ (Assistant trainee) ______________________________


S.No Date Name of the

Department

Major category of Technical Competencies

(Mark the relevant)

Accounting,

financial

reporting,

internal audit

and risk

management

Taxation and

corporate law

Treasury,

financial

management,

supply chain

management

and

information

technology

Any other

area deemed

appropriate

by TO (such as

marketing,

human

resource etc.)

Any other

appropriate

area

____________________________________________________ _______________________________________

Trainee Student Sign off Technical Supervisor sign off

Directive 1.03


Annual Record

Trainee Students Name______________________________________________CRN__________________________________________

Trainee Students Role____________________________________________________________________________________________


From__________________________________ to __________________________________

S. No Major category of Technical Competencies (Mark the relevant)

1 Accounting, financial reporting, internal audit and risk management

2 Taxation and corporate law

3 Treasury, financial management, supply chain management and information technology

4 Any other area deemed appropriate by TO (such as marketing, human resource etc.)

Value of the Experience Gained The intention of this section is to have you reflect on where you are today in terms of competency development and what value it has on your professional standing.

Example: I gained experience in finance department of a large sized textile industry involved in yarn manufacturing.

New Exposure or Advancement or advancement to previous expos ure The intention of this section is to reflect on specific exposure.

Specific area I was exposed to was accounts payable section, where I learned to deal with the creditors. This role required understanding of managing the credit terms of suppliers with that of the cash flows of the company. I also gained experience of the control procedures in place with regards to payment to creditors.

The level of management with whom communicated and dealt The intention of this section is to reflect your interaction with higher management.

Manager Finance level frequently and CFO occasionally.

Any ethical issue or dilemma faced The intention of this section is to have you reflect on where you are today in terms of competency development and what value it has on your professional standing.

Directive 1.03


While meeting with creditors, I met one of my old friends working for one of the creditors. I consulted my senior and found that it does not create noticeable familiarity threat.

Comments of Technical Supervisor The intention of this section is to have a feedback on your progress and development.

I reviewed the form and found correct.

Trainee Student Sign off: I confirm that the above information accurately reflects the exposure and level to which I have demonstrated over this annual period of my practical experience and my reflective thought from my work assignments for the said period. Date ____________________________________________________ ____________________________________________________

Signature

Technical Supervisor sign off. I have met with the CA Student noted above and discussed his/her competency and professional development and progression according to our CA Training Program. Date ____________________________________________________ ____________________________________________________

Signature

Directive 1.03


CAREER PROGRESSION PLAN

Training Organization_________________________________________________________________________

Trainee Student Name_____________________________________________CRN________________________

Technical

Competency

Minimum

required

Training Professional Skills

Professional Values, ethics

& Attitude Required

score

Intellectual personal Interpersonal

and

Communication Organizational

Professional

skepticism

and

professional

judgment

Ethical

Principles

Commitment

to the public

interest

(Total score from detailed assessment sheets)

Assistant

trainee - -

Associate

trainee Cleared 6

papers of

CAF

12

months >60%

Senior

Associate

trainee

Cleared 3

papers of

CFAP

24

months >70%

Directive 1.03


RECORD OF SATISFACTORY PERFORMANCE DURING THE PROBATIONARY PERIOD

Name of the Trainee-on-probation ___________________________________________CRN____________________________________ Father’s Name___________________________________________________________________________________________________

Name of MRS___________________________________________________________________________________________________

Probationary period start Date_____________________________________________________________________________________

Probationary period end Date_____________________________________________________________________________________

Particulars Total Marks Marks obtained

Aptitude for CA qualification 35

Awareness of personal performance 25

Follows the Instructions 25

Awareness of ethical principles( Integrity, objectivity and 15

Confidentiality)

Overall rating

□Unsatisfactory □Satisfactory □Good □Excellent

Trainee on probation Sign off______________ MRS sign off______________________

Date__________________________________ Date_____________________________

(Note: TO shall establish its own benchmark for rating a trainee on probation)

Directive 1.03


ASSESSMENT OF TRAINEE STUDENT

ASSISTANT TRAINEE ASSESSMENT


Total

1 Intellectual

• Is able to gather and assimilate information from various sources 10

and perspectives.

• Is able to identify unstructured problems. 5

• Demonstrates creativity in approaches to work. 5

20

2 Personal

• shows awareness of personal performance and demonstrates willingness to improve. 5

• Meets the deadlines of given task and appreciates time

management. 5

• Is able to identify possible challenges in the tasks given. 5

• Shows flexibility and does not hesitate to try new approaches. 5

20


• Demonstrates understanding of organizational goals and working together. 5

• Presents information in written and numeric form clearly.

Depicts awareness of clear communication. 5

• Demonstrates listening skills and understands given instructions. 5

• Is sensitive to cultural differences while communicating. 5

20

4 Organizational

• Performs the given tasks in accordance with the established

procedure within the deadline. 5

• Understands and follows the quality standards of the 5

organizations.

10


• Is able to draw questions on financial information and data. 5

Directive 1.03



• Is able to analyze the responses on the questions raised. 5

10


• Comprehends importance of fundamental ethical principles. 5

• Shows sensitivity on ethical issues. 5

10


• Is aware of social responsibilities of accountants. 5

• Comprehends consequences of unethical behavior to the individual, to the profession and to the society at large. 5

10



Name ___________________________________ Name _________________________________


Directive 1.03


ASSOCIATE TRAINEE ASSESSMENT


Total

1 Intellectual

• Analyzes information gathered from various sources and 5

perspectives.

• Analyzes the unstructured problems. 5

• Considers alternative approaches to getting the job done. 5

15

2 Personal

• Is eager to develop professional knowledge. 3

• Understands importance of high personal standards and accepts 3

feedback.

• Identifies professional commitments and apply skills of 3

effective time and resource management.

• Is able to identify possible challenges and solutions in the tasks 3

given.


15


• Works effectively in a team. 3

• Presents information in written and numeric form clearly. 2

Communicate ideas clear through oral communication.

• Communicates effectively using listening and questioning skills. 2

• Expresses logic and rational clearly while communicating. 3

• Communicates effectively in teams across all levels and produce 2

results.

• Takes difference of opinion positively. 2

• Displays sensitivity to cultural and language differences while 2

communicating.

• Actively participates in team by presenting ideas. 4

20

4 Organizational • Performs the given tasks in accordance with the established 2

procedure within the deadline.

• Follows the organizational quality standards and pays attention 2

to details.

• Gels well in teams, displays sensitivity to shortcomings of others 2

and understands importance of encouragement.

• Understands importance and ways of delegation of work. 2

• Understands the leadership traits. 2

10

Directive 1.03




• Applies skeptical mindset to critically assess financial 10

information and data presented.

• Identifies reasonable alternatives based on all relevant facts and 10

circumstances.

20


• Comprehends nature of ethics. 2

• Recognizes rules-based and principles-based approaches to 2

ethics.

• Applies fundamental principles of ethics. 3

• Adopts professional behavior in accordance with standards and 3

ethical best practice.

10


• Comprehends ethics within the profession and in relation to 2

social responsibility.

• Comprehends the role of ethics in relation to business and good 2

governance.

• Understands the relationship of ethics, law and regulations and 3

relationship with public interest.

• Comprehends consequences of unethical behavior to the 3

individual, to the profession and to the society at large.

10



Name ___________________________________ Name _________________________________


Directive 1.03


SENIOR ASSOCIATE TRAINEE ASSESSMENT


Total

1 Intellectual

• Researches information from a variety of sources and perspectives. 3

• Identifies solutions to unstructured, multifaceted problems. 3

• Applies reasoning, critical analysis, and innovative thinking to 4

solve problems.

10

2 Personal

• Demonstrates a commitment to learning. 2


reflection.

• Evaluates professional commitments and manages time and 2


• Anticipates challenges and plan potential solutions. 2


10


• Displays cooperation and teamwork when working towards 2



and orally.



agreements.


environment.


communication.


commitment.

15

4 Organizational • Undertakes work assignments in accordance with established 2




• Uses effective people management skills to motivate others. 2


• Applies leadership skills to influence others to work towards 2


10

Directive 1.03






• Identifies reasonable alternatives to help reaching well-reasoned 10


20





• Applies fundamental ethical principles to ethical dilemmas. 5



20





governance.





15



Name ___________________________________ Name _________________________________


Directive 1.03


SENIOR ASSOCIATE TRAINEE ASSESSMENT UPON COMPLETION OF TRAINING


Total

1 Intellectual

• Researches and evaluates information from a variety of sources 3

and perspectives and draw appropriate conclusions.

• Identifies, evaluates and recommends solutions to unstructured, 3

multifaceted problems.

• Applies innovative and critical thinking to solving problems. 4

10

2 Personal

• Applies the principles of lifelong learning. 2


reflection.

• Evaluates professional commitments and manage time and 2


• Proactively anticipates challenges and plan potential solutions. 2


10


• Promotes cooperation and teamwork when working towards 2



and orally.



agreements.


environment.


communication.


commitment.

15

4 Organizational

• Undertakes work assignments in accordance with established 2




• Uses effective people management skills to motivate and 2

develop others.


• Demonstrates effective leadership skills. 2

10

Directive 1.03






• Identifies reasonable alternatives to reach well-reasoned 10


20





• Applies fundamental ethical principles to ethical dilemmas and 5

determines an appropriate resolution.



20





governance.





15



Name ___________________________________ Name _________________________________


Directive 1.03


MINIMUM STIPEND RATES EFFECTIVE FROM JULY 1, 2019

1. CAF Passed or equivalent thereto (Training period 3.5 years)

2. Four years Graduate degree holders from Specified Degree Awarding Institutes/ Four years degree holders

from any recognized Degree Awarding Institute with major in accounting or finance (Training period 3 years)


On Commencement of Training 15, 800




3. Other Qualifications (Training period 4 years)











Directive 1.03

Directive 1.04

TABLE OF CONTENTS


1. Recognition of degree awarding institutes 1

2. Declaration of RDAI status 1

3. Pre-requisite to become RDAI 1

4. Eligibility criteria 2

5. Relevant degree program 2

6. Specified degree program 3

7. Self-evaluation 3

8. Progression 3

9. Renewal of SDAI status 4

Benchmark for self-evaluation of relevant degree awarding institute 5

Self-evaluation report 7

Students’ Performance Benchmark-Relevant Degree Awarding Institution 7

Students’ Performance Benchmark-Specified Degree Awarding Institution 8

Students’ Registration Benchmark-Specified Degree Awarding Institution 9

Directive 1.04

Directive 1.04

SPECIFIED DEGREE AWARDING INSTITUTES (SDAI) AND RELEVANT DEGREE AWARDING INSTITUTES (RDAI)

In exercise of the powers conferred by Section 27(2)(c) of the Chartered Accountants Ordinance, 1961 read with bye-laws 2(1)(ma), 123 and 129A of the Chartered Accountants Bye-Laws 1983, the Council of the Institute has introduced the following scheme that lays down the process of recognition of universities or degree awarding institutes (both hereinafter be called DAI) for the purposes of exemptions from ICAP examinations.

1. RECOGNITION OF DEGREE AWARDING INSTITUTES 1.1. There shall be two tiers of DAIs, namely:

Tier 1 Specified Degree Awarding Institute (SDAI) Tier 2 Relevant Degree Awarding Institute (RDAI)

1.2. An SDAI offers Specified Degree that facilitates the candidate who holds such degree to

qualify for exemption from all papers of Assessment of Fundamental Competencies (AFC) and Certificate in Accountancy and Finance(CAF) levels subject to the criteria prescribed under Chartered Accountants Bye-laws 1983.

1.3. An RDAI offers Relevant Degree that facilitates the candidate who holds such degree to

qualify for exemption from all papers of Assessment of Fundamental Competencies (AFC) and first four papers of Certificate in Accountancy and Finance(CAF) level subject to the criteria prescribed under Chartered Accountants Bye-laws 1983.

1.4. Criteria referred to in paragraph 1.2 and 1.3 provides minimum matching of the contents

of syllabus and minimum marks or grades that a student is required to obtain in aggregate and in relevant subjects in order to be eligible for exemptions.

1.5. Any DAI desiring to become SDAI shall first be required to gain status of RDAI under this

Directive and then achieve prescribed performance level in order to progress to SDAI status.

2. DECLARATION OF RDAI STATUS 2.1. Interested DAI shall prepare a proposal for RDAI status. The proposal shall include:

a. An expression of interest by the DAI on a prescribed format; b. Detailed profile of the DAI; and c. Necessary details along with required documentation to demonstrate that all the

pre-requisites for becoming an RDAI as per this Directive have been complied with.

2.2. The proposal shall be submitted by a person authorized by the management of DAI.

2.3. Upon successful completion of all requirements for recognition a certificate to the effect that the DAI is a Relevant Degree Awarding Institute shall be issued by the Institute of Chartered Accountants of Pakistan (Institute). The certificate will be valid for a period of three years after which a fresh evaluation of eligibility will be conducted.

2.4. If an RDAI fails to seek renewal of its status the students registered with RDAI at the time of

withdrawal of its status shall on completion of their degree programs be deemed to have gained their degree from RDAI if they opt to pursue CA Pakistan; provided their names and details are forwarded by the RDAI to ICAP within 30 days of withdrawal of it status.

3. PRE-REQUISITE TO BECOME RDAI

Any DAI recognized by the Higher Education Commission may become an RDAI if it: a. fulfills the eligibility criteria given in this directive; and b. offers Relevant Degree Program (a program mapped with ICAP syllabus of required

number of papers). SPECIFIED DEGREE AWARDING INSTITUTES (SDAI) AND RELEVANT DEGREE AWARDING INSTITUTES (RDAI) 1

Directive 1.04

4. ELIGIBILITY CRITERIA 4.1. Degree awarding institutes of Pakistan

The following are the eligibility criteria for a DAI for becoming RDAI:

a. The DAI should be in W 3 or above category specified by Higher Education

Commission (HEC) or equivalent category and successfully perform a self-evaluation as specified in this Directive.

b. At least two faculty members, fulltime or adjunct, are members of the Institute.

c. At least one batch of graduates of relevant degree is available in job market and for

further studies. In case of a high ranked DAI which intends to introduce relevant degree program, ETCOM may allow issuance of letter of comfort on the basis of a clear expression of interest by the said DAI. However, RDAI status to such DAI may be granted after two years of successful offering of Relevant Degree Program subject to compliance with all pre-requisites specified in this directive.

d. It can be reasonably demonstrated that the relationship will bring meaningful

benefits to the students. e. The number of students enrolled in relevant courses or who are reasonably expected to

be enrolled is sufficient to justify the resources to be applied in the exercise of evaluation and recognition. It is expected that on average more than 10% of the graduates of relevant degree program will pursue CA Pakistan qualification.

f. DAI agrees to award credit to students and members of ICAP in its degree programs

for the subjects against which syllabus of the Institute matches at least 70% with that of DAI.

4.2. Foreign degree awarding institutes including those operating in Pakistan

Top 400 institutions on the basis of ranking of Times Higher Education shall be eligible for RDAI status. A foreign DAI shall not be progressed to SDAI status.

5. RELEVANT DEGREE PROGRAM

Relevant Degree program shall be required to fulfill the following conditions:

a. The program should be a four year degree program or equivalent to 16 year education;

b. The syllabus contents and learning outcomes of the relevant subjects should match at least 70% with that of the prescribed syllabus and learning outcomes of all papers of Assessment of Fundamental Competencies and Certificate in Accountancy and Finance of the Institute.

c. The examination papers of relevant subjects of RDAI broadly cover the whole syllabus

with appropriate balance d. The degree program collectively should qualify for exemption from the following

examinations of Assessment of Fundamental Competencies and Certificate in Accountancy and Finance stages:


AFC-2 Business Communication

AFC-3 Quantitative Techniques




CAF-3 Business Law


SPECIFIED DEGREE AWARDING INSTITUTES (SDAI) AND RELEVANT DEGREE AWARDING INSTITUTES (RDAI) 2

Directive 1.04

6. SPECIFIED DEGREE PROGRAM

Specified Degree program shall be required to fulfill the following conditions:

a. The program should be a four year degree program or equivalent to 16 year education; b. The syllabus contents and learning outcomes of the relevant subjects should match at

least 70% with that of the prescribed syllabus and learning outcomes of the AFC and CAF level papers of Institute and preferably should be of more advanced level.

c. The degree program collectively should qualify for exemption from the all examinations of Assessment of Fundamental Competencies and Certificate in Accountancy and Finance stages.

7. SELF-EVALUATION 7.1. The DAI shall prepare a ‘self-evaluation report’ along with working papers prepared on

the basis of benchmarks set forth in this directive.

7.2. The DAI shall be required to obtain (i) 700 points in aggregate and (ii) minimum points in certain pre-requisite areas as specified in the benchmark attached with this directive, to be eligible for recognition as RDAI.

7.3. The ‘self-evaluation report’ shall be accompanied by a Reasonable Assurance Report

issued under the ‘International Standards on Assurance Engagement’ by a practicing chartered accountant firm that carries satisfactory QCR rating.

7.4. In case the assurance report contains a modification, the Institute shall take decision after

taking into consideration the impact of such modification.

8. PROGRESSION 8.1. There shall be the following progression process for national RDAI to advance to SDAI status:

a. RDAI is either already in or progresses to W 4 category specified by the Higher

Education Commission of Pakistan and it continues to meet the self-evaluation criteria specified in this directive.

b. From the date of declaration as RDAI, the performance of students holding Relevant Degree of RDAI shall be monitored by the Institute on the basis of students passing percentage in the remaining subjects of Certificate in Accountancy and Finance examinations of the Institute or appropriate gateway tests of these subjects. The same shall also be shared with RDAI after each attempt.

c. The syllabus of RDAI matches more than 70% of all subjects of AFC and CAF levels and preferably most of subjects of CFAP level.

d. The RDAI shall submit an annual declaration that it continues to meet the self-evaluation criteria and there is no significant change in the syllabus over the year except for the changes already informed to and agreed by the Institute.

e. The examination papers of relevant subjects of RDAI broadly cover the whole syllabus with appropriate balance.

f. On average more than 10% of the annual graduates of relevant degree program are pursuing chartered accountancy CA Pakistan qualification.

g. The RDAI shall advance from RDAI to SDAI status if the performance of students holding Relevant Degree of RDAI in three consecutive attempts of the above mentioned examinations is ranked 20% above the average result of ICAP specified under the ‘Students’ Performance Benchmark’ set forth in this directive.

h. A certificate to the effect that the RDAI has been upgraded to Specified Degree Awarding Institute shall be issued by the Institute.

8.2. The certificate of declaration of SDAI shall be for a period of three years.


Directive 1.04

9. RENEWAL OF SDAI STATUS 9.1. At the expiry of certificate of declaration of SDAI, the renewal shall be made in the

following manner: a. From the date of declaration as SDAI, the performance of students holding Specified

Degree of SDAI shall be monitored by the Institute on the basis of students passing percentage in Certified Finance and Accounting Professional examinations of the Institute. The same shall also be shared with SDAI after each attempt.

b. The Institute shall also monitor the registration of the students in chartered accountancy program, which is expected to exceed on average 10% of the total graduates of relevant programs over the last three years.

c. SDAI is W 4 category specified by the Higher Education Commission of Pakistan and it continues to meet the self-evaluation criteria specified in this directive.

d. The syllabus of SDAI matches more than 70% of all subjects of AFC and CAF levels and preferably most of subjects of CFAP level.

e. The examination papers of relevant subjects of SDAI broadly cover the whole syllabus with appropriate balance.

f. The performance of students holding Specified Degree of SDAI in any three consecutive attempts during three years of SDAI status is ranked 10% above average result specified under the ‘Students’ Performance Benchmark’ set forth in this directive.

g. The certificate of declaration of SDAI shall be renewed for another three years if the SDAI satisfies the above criteria.

h. If SDAI fails to satisfy the above criteria then the SDAI shall be downgraded to RDAI status.

9.2. The students registered with SDAI at the time of declaration of downgraded status shall

be deemed to have gained their degree from SDAI if they opt to pursue career as chartered accountants after completion of their degree program; provided their names and details are forwarded to ICAP within 30 days of downgrading.


Directive 1.04

Benchmark for Self-Evaluation of

Relevant Degree Awarding Institute

Maximum

Mandatory

S. No. Particulars Benchmark Minimum

Points

Points

1 Students – institution wide

1.1 Number of student passed having 16 100 500 students per year 50

years of education during last two years. passing out

1.2 Number of student passing per year 100 250 students per year 50

having M.Phil./16 + years of education passing out

during last two years.

1.3 Number of Ph.D. Produced 50 5 per year 20

2 Facilities – institution wide

2.1 Library 50 100,000 books on 20

various subjects

2.2 Computer facilities 50 200 systems of good 25

configuration

2.3 Classroom furnished with minimum 50 Each class room 1 25

seating capacity of 40 students point

(the area on the basis of 10 sq feet per

student basis)

2.4 Hostel(s) 50 400 students capacity 0

2.5 Auditorium(s) 50 400 students capacity 25

2.6 Sports facility 50 For 500 students 25

2.7 Cafeteria(s)/Mosque(s) 30 Each with 250 persons 25

capacity

3 Faculty – Accounting or Business School, (Accounting, Commerce and Business Administration)

3.1 Faculty qualification 200 Category (a) 10 points 100

a. PhDs/ Fellow Chartered per person

Accountants Category (b) 8 points

b. M Phil/Associate Chartered per person

Accountants and members of Category (c) 6 points

professional accountancy bodies

per person

recognized by ICAP,

Category (d) 4 points

c. Faculty having 16 + years of

per person

Education

d. Faculty having 16 years of The points are for

Education

e. Faculty of Accounting, Auditing faculty members

and related subjects must be of employed on full time

chartered accountant basis.

f. Faculty of Cost Accounting must For part time teachers

be of member of recognized the points will be

professional accountancy body 25%only.


Directive 1.04

3.2 Student Teacher Ratio 80 25:1 40

3.3 Involvement of external examiners 100 Per relevant subject 50

(10 points)

4 Students – Accounting and Business School, (Accounting, Commerce and Business Administration)

Total number of student enrolled 100 400 students 50

5 Research – Institution wide

5.1 Number of Research Papers Published 90 10 points for each 10

or presented by the Faculty Members paper and publication

& Students and Number of Journals/ per year

books Published by the DAI

5.2 Institution Organized Conferences, 50 10 points for each 20

Symposium, Seminars/Workshops at event per year

National and International Level.

TOTAL 1200

Explanatory Notes:

1. Professional bodies recognized by ICAP (Ref. 3.1) are those whose qualified members are offered membership of ICAP without further examinations.

2. Points will be prorated where the points achieved against a benchmark are less than the

maximum.

Example:

Benchmark: Student Teacher Ratio

Maximum points 80

Scale 25:1

Achieved 4000 enrolled students

100 teachers

Ratio 40:1

Points (25/40 * 80) 50

3. Qualitative evaluations must be supported by a brief description on the subject matter.

***** SPECIFIED DEGREE AWARDING INSTITUTES (SDAI) AND RELEVANT DEGREE AWARDING INSTITUTES (RDAI) 6

Directive 1.04


AS AT ________________________

NAME OF DAI

Evaluation based on scale Maximum Points

Mandatory Working

S. No. Particulars minimum paper

for achievable points Points obtained

points reference

Submitted by ________________________________ (Signature and name of authorized person)

Date and place _______________________________

Students’ Performance Benchmark

Relevant Degree Awarding Institution

Data Analysis

Subjects Attempt 1 Attempt 2 Attempt 3 Total

Total Pass Total Pass Total Pass Total Pass Performance of Students holding

Relevant Degree of RDAI






Total A B

All students of ICAP who attempted

the above papers






Total X Y


Directive 1.04

Ranking of Performance of Students

holding Relevant Degree of RDAI Below average

Performance is below the average performance of all ICAP students in aggregate term. i.e. B/A <Y/X Average

Performance is equal to the average performance of all ICAP students in aggregate term. i.e. B/A = Y/X 20% Above Average

Performance is 20% greater than the average performance of all ICAP students in aggregate term. i.e. (B/A) ÷ (Y/X) = 1.20

Students’ Performance Benchmark

Specified Degree Awarding Institution

Data Analysis

Subjects Attempt 1 Attempt 2 Attempt 3 Total

Total Pass Total Pass Total Pass Total Pass

Performance of Students holding

Specified Degree of SDAI

CFAP-1 Advanced Accounting and Financial

Reporting






Total A B

All students of ICAP who attempted

the above papers

CFAP-1 Advanced Accounting and Financial

Reporting






Total X Y


Directive 1.04

Ranking of Performance of Students

holding Specified Degree of SDAI

Below average Performance is below the average performance of the students in aggregate

term. i.e. B/A < Y/X

Average Performance is equal to the average performance of the students in aggregate

term. i.e. B/A = Y/X

10% Above Average Performance is 20% greater than the average performance of all ICAP students in aggregate

term. i.e. (B/A) ÷ (Y/X) = 1.10

Students’ Registration Benchmark

Specified Degree Awarding Institution

Data Analysis

Total Enrolled Passed out

Registered with

ICAP

Year 1

Year 2

Year 3

Total

Average per year A B C

Required Registration of Students

holding Specified Degree of SDAI

C >10% of B

*****

(260th Council meeting held on 8 January, 2015)

Shoaib Ahmed

Acting Secretary/COO


Directive 1.04

1.08

MINIMUM PERIOD OF TRAINING TO BE SERVED VIS A VIS APPEARANCE

AT INTERMEDIATE EXAMINATION "The Council approved a decision of the Examination Committee that the registered students who had served the minimum period for qualifying to sit in the Intermediate Examination and were allowed to appear in an examination should be allowed to repeat the examination in case of failure even if they discontinue their training without completing the period specified under the bye-laws. This means that a candidate having attained his eligibility once should not be debarred from reappearing in case of discontinued training.''

(77th meeting of Council - August 10, 1985)

1.15

NOTIFICATION REGARDING DIRECTIVE 1.15 OF THE COUNCIL

(EXEMPTION FROM PRE-ENTRY PROFICIENCY TEST)

This is to notify that the Council of the Institute of Chartered Accountants of Pakistan in its meeting held on September 17, 2011 has reviewed the exemption policy for Pre-entry Proficiency Test notified through Directive 1.15 dated March 5, 2011 and has decided to keep the application of the Directive in abeyance till further notice. Therefore, the exemption policy as applicable before the issuance of Directive 1.15 now stands restored.

(228th

meeting of the Council held on September 17, 2011)

DIRECTIVE FOR MODIFICATION IN THE EXEMPTION POLICY FOR PASSING THE PRE-ENTRY PROFICIENCY TEST

In exercise of the powers conferred under bye-law 123 of the Chartered Accountants Bye Laws, 1983, the council in its 224th meeting held on March 5, 2011 has approved the following policy in respect of exemption from the Pre-entry Proficiency Test (PPT).

A. Criteria for Exemption

i. Academic Examination

Students who have passed the following academic qualifications with the specified minimum number of marks/grades given against each of the same.

Examinations Marks/Grades

Masters 55% and above

Bachelors 65% and above HSSC 70% and above A Levels One B & One C

ii. Examination held by others Professional bodies.

Passing full examination of any of the following accountancy institutions leading to their membership:

ACCA, AICPA, CIMA, ICMAP and PIPFA.

B. Effective date

This directive will become effective from July 1, 2011.

C. Withdrawal

Effective July I, 2011 all previous directives on the matters of exemption from passing the Pre-entry Proficiency Test ( P P T ) would stand withdrawn.

(224th meeting of the Council held on March 5, 2011)

Directive 1.19

DECLARATION OF SPECIFIED DEGREE AWARDING INSTITUTE (SDAI) AND

RELEVANT DEGREE AWARDING INSTITUTE (RDAI)

In exercise of the powers conferred by Section 27(2)(c) of the Chartered Accountants Ordinance, 1961

read with bye-laws 2(1) (ma), 123 and 129A of the Chartered Accountants Bye-Laws 1983, the Council of

the Institute declares the following as its Specified Degree Awarding Institute (SDAI) and Relevant Degree

Awarding Institute (RDAI):

S. No Name Status

1. Institute of Business Administration, Karachi SDAI

2. Lahore University of Management Sciences, Lahore SDAI

3. Institute of Business Management, Karachi RDAI

4. National University of Sciences and Technology, Islamabad RDAI

(241st Council meeting held on December 7 and 8, 2012)

(243rd Council meeting held on March 8 and 9, 2013)

(333rd Council Meeting held on October 9 and 10, 2020)

MEMBERS' HANDBOOK

PART IV

2. FOREIGN QUALIFICATIONS AND TRAINING


SECTIONAL INDEX

2. FOREIGN QUALIFICATIONS AND TRAINING

CONTENTS

2.01 Foreign training and examination (Whole) Revised 2008

2.02 Foreign training and examination (Part)

2.03 Residence in Pakistan a pre-requisite(withdrawn)

*2.01

(Revised 2008)

FOREIGN TRAINING AND EXAMINATION (WHOLE) “UK and other Institutes: The Council resolved that a person who has passed all the requisite examinations and has completed prescribed training and is eligible to be admitted as a member or is a member of any of the fo llowing Institutes, will be treated as having passed equivalent examinations and fulfilled the training requirements prescribed under the C.A. Bye- laws, 1983 for the purpose of membership of the Institute of Chartered Accountants of Pakistan:

1. The Institute of Chartered Accountants in England & Wales 2. The Institute of Chartered Accountants in Ireland 3. The Institute of Chartered Accountants of Scotland 4. The Institute of Chartered Accountants in Australia 5. The Canadian Institute of Chartered Accountants

Provided that if such members desire to start practice as Chartered Accountants, they will have to pass the papers of “Advanced Taxation” and “Corporate Laws” of the Final examination and also undergo training with a firm in practice in Pakistan for one year if their training did not involve at least 50% training with a firm enterprise in practice.”

This directive was approved by the Council in its meeting held on July 16, 1997.

The Council in its 125th meeting held on January 07, 1998 took a decision on the matter deferred from the meeting of July 16, 1997 that for the time being no recognition can be given to the training of the Institute of Chartered Accountants of India.

(This directive supersedes earlier Directive 2.01 pursuant to 19th meeting of the Council held on December 11, 1967, 126th meeting of the Council held on April 14, 1998 and 187th meeting of the Council held on January 26, 2007)

(198th meeting of the Council August 25-26, 2008) * This Directive prescribes the institutes for the purposes of Bye Law 109. For revised conditions refer to new Bye-Law 109.

2. 02

FOREIGN TRAINING AND EXAMINATION (PART)

ACCA and CIMA

The Council decided that:

a. Candidates / students who have successfully completed all examinations of ACCA / CIMA on or after June 1, 2002 and apply for exemption and registration to ICAP would be exempted from the under mentioned examinations only:

(i) Pre-entry Proficiency (ii) Foundation and Intermediate

b. The Council also decided in respect of ACCA/CIMA qualified students registered with ICAP upto May 31, 2002, to extend the following facility to the said students:

(i) ACCA/CIMA qualified candidates who were granted exemptions from certain papers of Professional examinations upto May 31, 2002 shall be required to sit for a Specified paper of Advanced Accounting and Financial Reporting; Management Accounting; Business Finance Decision at Module F examination with effect from June 2003 Examination Session. The said paper shall be in addition to other than the exempted papers of Module F required to be taken by them. The syllabus of specified paper will be as prescribed and shall be subject to changes as applicable to ICAP students. In particular the following may be noted:

Questions will not be set on new legislation, standards, guidelines, statements and exposure drafts at any examination held within the six months of the publication thereof. Six months are to be counted from the date of publication of International Accounting Standard / Exposure Draft by ICAP.

Notifications and circulars in respect of Finance Act / Ordinance, issued within a period of less than six months from the examination date will not be tested. However, the Finance Act / Ordinance would be examined from the attempt following its date of enforcement.

(ii) The procedure described in paragraph b (i) above shall be valid upto December 2005 Examination Session whereafter the facility offered shall stand automatically withdrawn.

(156th Meeting of the Council - April 5, 2003)

2. 02 ICAEW and AICPA: The Council decided that: (i) The exemptions currently available for candidates who had completed

the PE-1 examination of The Institute of Chartered Accountants in England and Wales (ICAEW) be withdrawn as the said examination had been discontinued at ICAEW.

(ii) Cases of exemptions to AICPA qualified candidates be dealt with on a

case to case basis as different states in the US follow different policies.

(155th Meeting of the Council - February 1, 2003) Bangladesh Institute: “The Council decided that such students who had completed their service as an audit/articled clerk before December 16, 1971 and passed equivalent examination in Bangladesh subsequently be considered for exemption from the examination of the Pakistan Institute in the relevant Part or Parts on case to case basis and after getting confirmation of result from the Institute of Bangladesh as is the practice for other recognized Institutes”.

(71st meeting of the Council - December 21, 1983) UK Institute:

The Council decided that:

i. Students who completed training and passed Intermediate Examination from the UK Institute should be exempted from Intermediate Examination.

ii. Students having completed training and passed Foundation / Intermediate and Professional Examination I (PE I) Part I should be exempted from Intermediate and paper II and IV of Final Group II.

iii. Students availing exemptions in Final Group II will not be entitled to referral concession and they will be allowed only three successive attempts to clear the remaining subject failing which they will be required to appear in all the subjects of Final Group II".

(64th meeting of the Council - December 24, 1981

SECTIONAL INDEX

3. FEES AND SUBSCRIPTIONS

CONTENTS

3.01 Schedule of various fees

3.02

Retired members to pay fee at Concessional rates (Withdrawn)

3.03 Payment of Fee by Members

3.04 Concession in Fee for Those Members Who Have No Source

of Income

Directive 3.01

SCHEDULE OF VARIOUS FEES (Effective from 1st July 2020)

Pak Rupees MEMBERSHIP FEES: ADMISSION FEE: Associate (ACA) 500Fellow (FCA) 1,100Restoration Fee ACA 5,500Restoration Fee , FCA 5,500ANNUAL FEE: Associate - (ACA) 18,700Fellow - (FCA) 27,100Life Membership fee 3,000Foreign Affiliation 66,600MISCELLANEOUS: Technical Credentials Verification – Normal (7 working days) 1,100Technical Credentials Verification – urgent (3 working days) 2,200Duplicate Membership Certificate 4,200Duplicate Membership Card/ITAG 350Dispatch charges for documents outside Pakistan through courier 5,500ANNUAL PRACTICE FEE: Associate (ACA) 18,700 Fellow (FCA) 27,100

ICAP RENTAL CHARGES: KHI ISB LHR Auditorium Rent (For 4 Hours) 50,000 50,000 50,000Auditorium Rent (for each additional hour) 10.000 10.000 10.000New Building 1st Floor & 2nd Floor Hall with AC (Full day) 40,000 30,000 30,000New Building 1st Floor & 2nd Floor Hall without AC (Full day) 25,000 20,000 20,000Class Room with AC 10,000 - -Class Room without AC 6,000 - -

Directive 3.03 (Revised – 2018)

PAYMENT OF FEE BY MEMBERS

In pursuant to Section 6(2) and 15(2)(g) of the Chartered Accountants Ordinance, 1961 read with Bye-Law 10 of the Chartered Accountants Bye-Laws, 1983, the Council of the Institute decided to issue this Directive for compliance by the members. It is observed that every year in June, the Institute starts approaching its members for payment of fee for the upcoming financial year. Majority of members respond to the reminder calls and pay their outstanding dues, however every year there are some members (including practicing members) who pay their fee after a lapse of considerable time despite repeated reminders and follow up by the Institute. The Council of the Institute has considered the matter and decided to prescribe the following requirement for payment of fee: 1. All members are required to pay their annual membership fee by the last day of August every year. Non-payment of membership fee by members will result in removal of their names under section 19(1)(c) of the Chartered Accountants Ordinance, 1961 from the register of members with effect from the first day of September and accordingly they will not be entitled to practice as or to use the designation of “Chartered Accountant” with their names. 2. Before removal of names as above, appropriate communication may be published in August Newsletter clearly communicating the consequences that non-payment of annual membership fee would result in removal of name from the members’ register. Furthermore, the membership numbers of members who have not paid the fee by August 25 should be placed on the ICAP’s website in the members’ secured area on the same date and the link to this information should be placed at a prominent place on the website. The Council has advised the Secretariat to devise effective and efficient follow up mechanism in order to facilitate members in payment of their dues.

(Approved by the Council in its 300th meeting held on July 28, 2018)

.

Directive 3.04 (Revised 2019)

CONCESSION IN ANNUAL MEMBERSHIP FEES FOR MEMBERS EXPERIENCING SEVERE PERSONAL HARDSHIP OR BEING UN-EMPLOYED FOR MORE THAN ONE YEAR In exercise of the powers conferred by Section 27(2)(kk) of the Chartered Accountants Ordinance, 1961 read with Bye-Law 129A and provisos (iv) and (vi) of Bye-Law 10(1) of the Chartered Accountants Bye-Laws, 1983, the Council of the Institute has approved this Directive to provide the procedure required to be followed by such members who intend to take benefit of proviso (iv) or (vi) of Bye- Law 10(1) of the Chartered Accountants Bye-Laws, 1983. A member who intends to obtain concession in the annual membership fee as per proviso (iv) or (vi) of the Bye Law 10(1) of the Chartered Accountants Bye-Laws, 1983, must submit an undertaking on the prescribed form, not later than 30 days, before the start of each financial year.

Concession in annual membership fees under proviso (iv) of the Bye Law 10(1) of the Chartered Accountants Bye-Laws, 1983 (i.e. cases where the member is experiencing severe personal hardship) The undertaking, as stated above, would contain the date from which the member has been facing severe personal hardship along with brief details of the nature of the last job. The undertaking should be accompanied by a statement of annual earnings and expenses, number of dependents of the member and the reasons for such hardship. The reasons for the hardship may include, but are not limited to;

(i) inability to find employment due to migration to a foreign country, (ii) financial instability due to prolonged illness, (iii) permanent or temporary incapacity to work full-time, (iv) inability to work for a period due to special circumstances.

A concession under this proviso would be to the extent of fifty percent of the annual membership fees due.

Concession in annual membership fees under proviso (vi) of the Bye Law 10(1) of the Chartered Accountants Bye-Laws, 1983 (i.e. cases where the member remains un-employed for more than one year and is not engaged in any part-time remunerated activity)

.

The undertaking, as stated above, would contain the date from which the member has been unemployed along with brief details of the nature of the last job. A concession under this proviso would be to the extent of seventy-five percent of the annual membership fees due.

The member applying for concession under any of the above-mentioned provisos will inform the Institute within 30 days from the date of ending of the period of hardship or getting re-employed or getting engaged in any part/full time remunerated activity, as the case may be. In all cases, a pro-rata fee will be charged from the member for the relevant year in which he/she is no more experiencing personal hardship or has gained a full-time or a part-time employment, as the case may be. This Directive of the Council is applicable for annual membership fees falling due after July 1, 2019 and onwards.

[Approved by the Council in its 309th Meeting held on January 25-26, 2019]

SECTIONAL INDEX

4. PRACTICE ADMINISTRATION AS CHARTERED

ACCOUNTANTS

CONTENTS

4.0 Practice Administration as CAs

4.01 Association with different firms

4.02 Offices to be manned by Chartered Accountants

4.03 Partnership firms to send particulars in the prescribed Proforma

4.04 Status of employee members

4.05 No ban on styling firm against member's name occupying high

Government position

4.06 Styling of firms

4.07 Use of designation 'Auditors' by practicing firms prohibited

4.08 Sleeping partners of professional firms not to sign Form ‘C’

4.09 Permission to engage in non-professional work by sleeping partners

while holding practice certificate

4.10 Withdrawn

4.11 Withdrawn

4.12 Attestation of partnership deed for submission to the Institute

4.13 Quality Control Review Programme

4.14 Corporate Governance

4.15 Quality Control Review

4.16 Withdrawn

4.17 Absence from office for a practicing member

4.18 Procedures of network amongst the firms/ practices registered with

the Institute of Chartered Accountants of Pakistan

4.19 Retention and custody of working papers by Chartered accountant

firms

4.20 Conducting Non-Statutory Audits/Assignments

4.21 Directive On Standardization Of Letterheads Of Audit Firms

4.22 Engagement Of Chartered Accountants In Practice In Other

Occupations

4.23 Ensuring Audit Quality

4.24 Framework for Regulation and Supervision of Chartered Accountants

to Comply with Anti-Money Laundering & Countering the Financing

of Terrorism (AML & CFT) Requirements

4.25 Audit Practice Review & Support Program (APRSP)

MEMBERS' HANDBOOK

PART IV

4. PRACTICE ADMINISTRATION ASCHARTERED ACCOUNTANTS


4.01

ASSOCIATION WITH DIFFERENT FIRMS "The Council did not have an objection to the management of a branch office of a firm of chartered accountants in another city through an arrangement with another chartered accountant having his main office in the city provided a regular partnership deed had been signed. A Certified copy of the partnership deed is required to be deposited with the Institute".

(7th meeting of the Council - August 30, 1963) "The Council of the Institute considered the question of association of members of the Institute with different firms and management of branch offices and took the following decisions:- i) It was decided that the same partners of a firm of chartered

accountants should not be permitted to constitute another firm under a different name.

ii) A member in practice intending to join a partnership may associate

with two firms only including his sole-proprietary concern, if any. iii) Arrangement by a member with another member for looking after his

branch office should not be allowed. Such an arrangement, if it has to take place, should be only through a regular partnership deed (under the Partnership Act), a copy of which will be filed with the Institute. Any other arrangement will not be accepted.

(16th meeting of the Council - August 22, 1966)

As there appeared to be some doubt regarding the meaning of clause (ii) of Council's Directive No. 4.01 regarding Association with Different Firms, the matter was considered by the Council in its 127th meeting held on July 5, 1998 and it was decided to issue the following clarification:-

4.01 A member having a sole proprietary concern can enter into one more partnership. A member who does not have a sole proprietary concern can enter into partnership in two firms. In other word association of a member would not exceed two firms at a time, whether one is sole proprietary and the other partnership or both are partnerships.

(127th meeting of the Council - July 05, 1998)

4.02

OFFICES TO BE MANNED BY CHARTERED ACCOUNTANTS "Attention of the members is invited to bye-law *114 of the Chartered Accountants Bye-Laws, 1961 whereby a chartered accountant in practice or a firm of such chartered accountants having any branch office in Pakistan at the commencement of the Ordinance is required to place such branch office under the separate charge of a member of the Institute. A two years' period from the date of enforcement of the Ordinance and Bye-Laws i.e. 1st July. 1961 was allowed to regularize the position. The grace period of two years expired on 30th June, 1963".

(c.f. Para 12 of Circular 9 dated April 8, 1963)

"Of late certain cases have come to notice in which practicing members were found to be not complying with the directives of the Council, which require members to ensure that their various offices are functioning under charge of a member of the Institute. A serious view has been taken of this irregularity and it has been decided that provisions of bye- law *114 of the Chartered Accountants Bye-Laws, 1961 read with the Council's directives dated 8th April, 1963 should be specifically brought to the notice of the members. Members are requested to make note of these important provisions".

(Institute's Circular No. 1/60/CA-74 dated December 20, 1974) "The Council in its directive dated the 8th April, 1963 had advised that a Chartered Accountant in practice or a firm of such Chartered Accountants having any branch office or offices in Pakistan is required to place such office or offices under the separate charge of a member of the Institute. In further clarification of this directive the Council has decided that such branch office or offices of the members will be considered to be in charge of a member of the Institute only if a member resides physically and permanently at the place of such branch office or offices.

* Now see Section 26 of C.A. Ordinance, 1961 as amended.

4.02

"Members in practice having branch offices of their firms are requested to take a note of the above directive of the 'Council and to regularize the position by placing their branch office or offices under the charge of a member of the Institute who should be present physically and permanently at a place where such office or offices are situated".

(50th meeting of Council - July 31, 1976) The Council in its directive dated the 8th April, 1963 had directed that a Chartered Accountant in practice or a firm of such Chartered Accountants having any branch office or offices in Pakistan is required to place such office or offices under the separate charge of a member of the Institute. In further clarification of this directive the Council had decided that such branch office or offices of the members will be considered to be in charge of a member of the Institute only if a member resides physically and permanent ly at the place of such branch office or offices. However in view of the fact that the Rawalpindi / Islamabad are twin cities and situated in close proximity of each other, it is not feasible to enforce the above decision. The Council in its meeting held on July 25, 1990, therefore, decided to exempt the Rawalpindi/Islamabad offices from the application of Section 26 of the C.A. Ordinance, 1961. This Council's directive shall be deemed to have complied with if either of the offices in Rawalpindi/Islamabad are kept in charge of a member of the Institute if a member resides physically and permanently at either of the said places.

(94th meeting of the Council - July 25,1990)

4.03

PARTNERSHIP FIRMS TO SEND PARTICULARS IN THE PRESCRIBED PROFORMA

The Institute maintains separate records of Firms of chartered accountants functioning as partnership concerns. For this purpose Form 'C' * has been devised. The form duly completed and signed by all the partners of each firm are required to be filed with the Institute for record. Any change in the constitution of the firm as and when takes place, is also required to be intimated to the Institute in the same form.

(Institute's Circular No. 9 dated April 8, 1963)

Attention of members is also invited to bye- law 7 of the C.A Bye-Laws 1961 making it incumbent upon the members to notify any change in their address to the Institute promptly. Members are requested to convey to the Institute any change in their address within one month under all circumstances. Attention of members practicing in partnership is particularly invited to form *'C' wherein certain particulars are required to be furnished by them. It is important that a fresh form duly completed is submitted whenever any change in partnership takes place and the information must be furnished within one month of change.

(Institute's Circular No. 1/60/CA-74 dated December 20, 1974)

“For this purpose, all the requirements of this Directive will be considered to be fulfilled in case changes are notified by the firms to the Institute by using online web portal developed for this purpose”.

221 Meeting of the Council-November 7, 2010

* Now Form ‘C’, See Page 107.

4.04

STATUS OF EMPLOYEE MEMBERS

"The Council decided that an associate or a fellow of the Institute who is a salaried employee of a chartered accountants or a firm of such Chartered Accountants is to be deemed to be in practice for the limited purpose of training of the articled clerks. Such members will not to be deemed to be in practice for other purpose and will not be granted practice certificates under the Chartered Accountants Bye-Laws. An employee member will, however, be entitled to train articled clerks provided he fulfils the requirements of Bye-Laws *71 and other requirements. In other words he will be deemed to have completed 3 years continuous practice whilst serving in a firm of chartered accountants but will be permitted to train articled clerks after having acquired sufficient number of audits. As determined by the Council in his individual name or in partnership with a firm of chartered accountants".

(3rd meeting of the Council - May 9-11, 1962) Enquiry-(B) In this connection the following specific queries were received which were referred to the Ministry of Law for clarification. The queries and advice received are reproduced below:

Whether- (a) practicing members can form a limited company for

management consultancy;

(b) practicing members can form an unlimited company for management consultancy;

(c) non-practicing members can form a limited company for management consultancy; and

(d) non-practicing members can form an unlimited company for management consultancy.

* New Bye-law 102

4.04

"We confirm the presumption that the expression "member of the Institute" as it occurs in the opening part of schedule ** 'C' to the bye- laws includes the case of non-practicing member as well. A reference to section 4 of the Chartered Accountants Ordinance, 1961 will show, that for entry of name in the register of the Institute practicing in accountancy is not necessary and this gets added support from bye- laws 5 to 10 as also from the contents of Schedule 'A' to the Bye-Laws. We will invite attention to column 13 of the said schedule. "As far as queries are concerned we think that our earlier advice in this behalf would not bear repetition. We dispose of the queries with the remarks that practicing member can form an unlimited company for management consultancy provided provision of Schedule 'C' to the bye- law are not contravened and permission of the Council under paragraph 15 of that Schedule is obtained. As for a formation of a limited company in the case of practicing members is concerned that will be in violation of Section.*23 of the Ordinance. We may add that the attempted distinction in the case of non-practicing member introduces a fallacy. All that we need say in this regard is that no sooner non-practicing members will go far management consultancy they will become practicing members. On this view of the matter therefore we need not dilate any further and our answer to the queries as framed may be taken in the negative".

(Ministry of Law advice dated May 25, 1967)

* See part 1 of Schedule 1 of C.A. Ordinance 1961, as amended. ** Section 23 since amended to permit functioning of limited companies for practising as "Management Consultants".

4.05

NO BAN ON STYLING FIRMS AGAINST MEMBERS' NAMES OCCUPYING HIGH GOVERNMENT POSITIONS

"A question was considered by the Council whether there was any objection to styling practic ing firms after members' name who are occupying Government positions. These firms were established by the respective members prior to joining the Government. According to the legal advice obtained there was no bar to continue the firms under the names of such members."

(49th meeting of Council - December 26, 1975)

4.06 (Revised – 2010)

STYLING OF FIRMS A. Criteria for Approval of Trade/Firm Name:

1. The Council reaffirms to the effect that trade names of practicing members shall represent the name of the members in practice in the case of a sole proprietor or in the name or names of the partners for a partnership firm.

2. However, in the case of a partnership, a firm may , subject to the approval of the Council, style itself by adopting the abbreviations of the first names, the last names or the full names of the partners in a manner as explained below for the purpose of clarity:

Example: Names of the partners are:

i. Cee Dee

ii. Why Zed

Initials of the first names, or last names or the full names are permitted for styling the firm in one of the following manners:

(i) C.W. [& Co./ and Co./ & Company/ and Company/ & Associates/ and Associates]

(ii) D.Z. [& Co./ and Co. / & Company/ and Company/ & Associates/ and Associates]

(iii) C.D.W.Z. [& Co./ and Co. / & Company/ and Company/ & Associates/ and Associates]

The use of abbreviated names shall only be permitted subject to the prior approval of the Council on a case to-case basis.

Provided that a firm shall not be allowed to be registered by a name identical with that by which a firm or a company in existence is already registered, or by a name which resembles or can be construed to resemble the brand name or initials by which a firm or a company is generally known whether in Pakistan or internationally or so nearly resembles that name or a brand name or initials so as to be calculated to deceive or misrepresent.

4.06

(Revised – 2010)

However, where the firm or a company in existence is in the course of being dissolved and signifies its consent in such a manner as the Institute may require, the new firm or company may be registered in the name of the firm or the company being dissolved.

B. Inclusion of the Name of a Foreign Firm in the Name of the Pakistani Firm:

3. A recognition of an affiliation with a foreign firm may be permitted to be indicated in the name and style with which the Pakistani firm is allowed to practice in Pakistan by the Institute in a manner as referred to in this section B.

4. A Pakistani firm in practice may enter into any one of the following relationships with a foreign firm:

a) As an integrated firm;

b) as a member firm; or

c) in an other form.

The nature of each relationship as listed above has been explained for the purpose of this Directive in its appendix A.

5. The manner in which the name of a firm shall be styled to demonstrate the relationship as stated under paragraph 4 is explained below.

The initials / full name of the international firm may be included as a part of the name of the local firm using one of the three options as set forth:

Example:

Exe Why & Co. ABG / AlphaBeta Gamma

(Pakistani name complying (Initials/name

with this Directive ) of the foreign firm)

4.06

(Revised – 2010)

Option (a)

The name of the firm can therefore be:

Exe Why & Co.- ABG, Chartered Accountants

Option (b)

Abbreviated initials of the foreign firm may be made a part of the name of the Pakistani firm as follows:

ABG - Exe Why & Co., Chartered Accountants

Option (c)

The full name of the foreign firm may be made a part of the name of the Pakistani firm as follows:

Alpha Beta Gamma - Exe Why & Co., Chartered Accountants

or

Exe Why & Co. – Alpha Beta Gamma, Chartered Accountants

The insertion of a dash (–) between the two names, in any of the forms as mentioned above, is not compulsory.

The nature of the relationship between the Pakistani firm and the foreign firm should be mentioned on the letterheads and other stationery of the Pakistani firm.

6. The abbreviated initials or full foreign name will only be included as a part of the name of a Pakistani firm subject to each of the following conditions, as applicable:

a) A Pakistani firm which has a relationship as referred to in sub-paragraphs 4 (a) and 4 (b) above shall only be entitled to style its name in the manner as referred to under the options in paragraph 5 above.

4.06

(Revised – 2010)

b) The Pakistani firm which is affiliated with a foreign firm in any of the relationships as mentioned in paragraph 4 above shall have an exclusive right to operate in Pakistan on behalf of its affiliate subject to conditions laid down in this Directive.

c) The term foreign name, as used in this Directive, means a known name of an international network of firms (a foreign firm) which is primarily engaged in public accounting practice and recognised as such within and outside its own country of domicile.

d) Use of the Pakistani firm’s name under any of the options shall be subject to approval of the Council on a case to-case basis.

e) The Council before granting the requisite approval may obtain confirmation from the foreign firm that it has given permission to the applicant Pakistani firm for the sole use of its name in Pakistan.

f) The Pakistani firm shall ensure that all legal formalities, as required under the laws of Pakistan, for a change in the name of the firm by addition of the foreign name are complied with and documentary evidence thereof is provided to the Institute of Chartered Accountants of Pakistan (ICAP).

g) The Pakistani firm shall make an application to ICAP for registration of the revised name in the prescribed form, alongwith all the required documents and deposit the requisite fee as prescribed by the Council from time to time.

h) The Pakistani firm shall file with ICAP a copy of the affiliation agreement, by whatever name called, or relevant extracts therefrom, with the foreign firm or network of firms evidencing the existence and the nature of the relationship, duly attested by the senior partner of the Pakistani firm.

i) The Council shall be advised in writing by the Pakistani firm of any change in the nature of its affiliation with the foreign firm within a period of one month of the change taking place.

j) The Pakistani firm, which will have been granted permission by the Council to use a foreign name in accordance with the terms as stated above, and all its partners in Pakistan shall comply with the requirements of the Chartered Accountants Ordinance, 1961, its bye-laws, all directives of the Council and Technical Releases and all the other requirements as prescribed by the Institute from time to time and shall be subject to the Quality Control Review and the Investigation and Disciplinary processes of ICAP.

k) Any partner in the foreign / international network of firms who is not a member of ICAP shall not be permitted to hold out as being in practice in Pakistan until such time that he/ she has complied with the requirements contained in the Council Directive 2.01 (Revised 2008).

l) Upon revocation of the affiliation agreement(s), by whatever name called, by and between the Pakistani firm and the foreign firm or network of firms, it will be incumbent upon the Pakistani firm to inform ICAP of such an occurrence within one month thereof whereupon the permission granted for use of the foreign name as a part of the local name shall be withdrawn forthwith.

C. Other matters

7. The following should be considered when styling the name of a firm or adopting the name of the foreign firm as a part of the Pakistan firm’s name:

(a) The members should not represent to the public at large that their firm has partners who in fact are not Chartered Accountants in practice within the meaning of the Chartered Accountants Ordinance, 1961.

(b) Inanimate or abstract names partaking of the designatory character of services to be rendered should not be allowed in order to avoid disguised attempts at publicity.

8. The restrictions relating to styling of firms shall not apply in matters of succession in which case the continuation of the name of the previous firm, including where the initials or name of a foreign firm is included, is permissible. However, the inclusion of the name of the foreign firm shall continue to be subject to the requirements referred above.

9. The policies stated in this Directive shall also be applicable in respect of members engaged in the business of management consultancy.

The existing Directive 4.06 is superseded by this Directive No. 4.06 (Revised – 2010).

(214th meeting of the Council - January 28, 2010)

Appendix to the Council Directive No. 4.06 (Revised - 2010)

Integrated Firm An integrated firm represents a form of a membership firm wherein in addition to the requirements for a member firm as referred below, as a result of an affiliation (by whatever name called) with the foreign firm or network of firms, the profits / losses of the Pakistan firm are integrated with the financial results of the foreign firm / network of firms in whatever manner. Membership Firm A membership firm is a form of an affiliation where the Pakistan firm forms a part of the organisation / network of a foreign firm or a network of foreign firms being a firm / organisation / network recognised to practice as a professional accounting entity by any country being a member of the International Federation of Accountants (IFAC), and the Pakistani firm is identified as a ‘member’ of that firm / organisation / network. The sole proprietor / partner / partners of the Pakistani firm form a part or a member or a constituent of that foreign entity. Others Any other form of relationships that does not fall within the definition of an integrated firm or a membership firm. The Directive No. 4.06 (Revised-2005) before this revision reads as under:

4.06 (Revised – 2005)

STYLING OF FIRMS 1. Keeping in view the requirements of profession, locally and internationally and the developments in the

status of Pakis tani firms in relation to their affiliation with the foreign firms, it has been decide that an Identification of affiliation with a foreign firm / enterprise may be allowed to be indicated in the name and style with which the Pakistani firm is allowed to practice in Pakistan by the Institute.

2. A Pakistani firm in practice may enter into anyone of the following relationships with a foreign enterprise / firm: -

a) An integrated firm; b) A member firm; c) Others

The nature of each category as listed above has been explained for the purpose of this Directive in Appendix "A".

3. For the sake of clarity the relationship under 2 (a) and (b) above, the manner of styling the name has been explained as under:

The abbreviated initials / full name of the international firm may be i ncluded as a part of the name of the local firm as under:

Example (a) "Yahya Mehmood & Co. ABG / Alpha Beta Gamma

(Pakistan name complying (Abbreviated

with revised Directive 4.06 ) initials/name of the

foreign firm)

The name shall therefore be:

Yahya Mehmood & Co. - ABG . Chartered Accountants

Example (b)

Abbreviated initials / name of foreign firm may also be placed as under:

ABG - Yahya Mehmood & Co.

Example (c)

Alpha Beta Gamma - Yahya Mehmood & Co.

Nature of relationship should be mentioned on letterheads and other stationery.

4. The abbreviated initials or full foreign name will only be included as a part of name subject to the following conditions:-

a) Only the Pakistani firms having the relationship under 2(a) and (b) will be entitled to style their name in this manner;

b) The Pakistani firm having the nature of affiliation as mentioned in clause (a) shall have Pakistan as it exclusive territory to operate;

c) Use of name will be subject to approval by the Council on a case-to-case basis;

d) Any change in the nature of affiliation will be require to be intimated to the Council within one month of the change;

e) The term foreign names, as used in this revised D irective, mean a known name of international; networks of firms (foreign firms) which are primarily engaged in public accounting practice and recognized as such within and outside their own respective countries;

f) The Institute of Chartered Accountants of Pakistan (ICAP) before granting the requisite permission may obtain confirmation from the foreign firm that has given permission for the sole use of its name in Pakistan by the local/Pakistani firm;

g) Pakistani firms which will have been granted permission by ICAP to use a foreign name on the terms stated above shall comply with other requirements prescribed by the Institute from time to time;

h) The policy stated herein shall also be applicable in respect of members engaged in Management Consultancy business;

i) The Pakistani firm shall file a copy of t he Management and Licensing agreement or relevant extracts there from, duly attested by the local Senior Partner, with the International Firm or network of firms to establish the nature of relationship;

j) The Pakistani firm shall ensure that all legal for malities, as required under the laws of Pakistan, for a change in name of the firm by addition of the foreign name are complied with and documentary evidence thereof provided to ICAP;

k) The Pakistani firm shall make an application in the prescribed form, along with all documents required to ICAP and deposit the requisite administrative fee as prescribed by the Council from time to time;

I) The Pakistani firm and all its partners in Pakistan shall f o l l o w the C.A. Ordinance, bye-laws, all Council Directives and Technical Releases and be subject to the Quality Control Review and Investigation and Disciplinary process of the ICAP;

m ) Non -Members of ICAP who are partners in the International network or firm shall not be permitted to hold themselves out as being in practice in Pakistan until such time that they have complied with the Council Directive 2.01 (Revised 1998); and

n) Upon revocation of the agreement(s) by and between local firm and the International Firm or Network of Firms, it will be incumbent upon the local firm to inform ICAP of such occurrence, whereupon the permission granted for use of name shall be forthwith withdrawn.

5 . In order to ensure the professional interest of members, the following objectives needed to be kept in view in the matter of adopting firm' name:

(a) The members should not represent to the public at large that their firm has partners who in fact are not Chartered Accountants in practice within the meaning of Chartered Accountants Ordinance, 1961.

(b) Inanimate or abstract na mes partaking of the designatory character of services to be rendered should not be allowed in order to avoid disguised attempts at publicity.

6 . The Council reaffirms to the effect that trade names of practicing members shall be after the name of the members in practice in the case of a sole proprietor or in the name or names of the partners in the case of a firm. This restriction shall not apply in the case of a succession in which case the continuation of the name of the previous firm is permissible and in case of name of international firm as specified in paragraph 3 above.

7 . The Council further decided that the above policy shall also be applicable in respect of members engaged in Management Consultancy business.

The existing Directive 4.06 and 4.11 are superseded by this Directive No. 4.06 (Revised-2005)

( 171st meeting of the Council – April 29, 2005)

Appendix to Council Directive No. 4.06 ( Revised – 2005) Integrated Firm Is the form of membership firm wherein in addition to the requireme nts for m ember firm as referred above, as a result of an agreement / with the foreign firm / enterprise the profit / losses of Pakistan firm are integrated with worldwide / foreign enterprise in certain manner. Membership Firm Its a form of affiliation wh ere the Pakistan firm forms part of the organization of a foreign firm / enterprise being a firm / organization recognized to practice as professional accounting firm by any country being the member of International Federation of Accountants (IFAC), and th e Pakistani firm is identified as "member". The partners / partner of the Pakistani firm form part / constituent of international enterprise / entity. Others Any other form of relationships that does not fall within the definition of a membership / integrated firm.

4.07 USE OF DESIGNATION 'AUDITORS' BY PRACTICING FIRMS PROHIBITED "The Council decided that the members should use only CHARTERED ACCCOUNTANTS(S) as their designation on letter head forms etc. and should drop the use of word AUDITORS(S) since the words CHARTERED ACCOUNTANTS(S) ordinarily covered a number of functions including auditing".

(2nd meeting of Council - January 8-9, 1962)

4.08 SLEEPING PARTNERS OF PROFESSIONAL FIRMS NOT TO SIGN

FORM 'C' "While considering a question of obtaining signatures on form *'C' by all the partners of practicing firms it was decided not to require signatures of sleeping partners on form*'C' provided the partnership agreement of the firm includes a clause that the interest of the sleeping partners in the firm was restricted to the sharing of profits to the extent of retiring benefits only. Such agreement duly signed by all the partners should be filed with the Institute within six months of the filing of form *'C' in this respect."

(70th meeting of the Council - September 12, 1983)

* New Form ‘C’

4.09

PERMISSION TO ENGAGE IN NON-PROFESSIONAL WORK BY SLEEPING PARTNERS WHILE HOLDING PRACTICE

CERTIFICATE "Considering a request from a member for permission to engage in non-professional work while holding practice certificate, the Council decided to accept the request and to approve the basis of grant of such permission in the future on the following criteria:- 1. 20 years of membership of the Institute; and 2. 15 years association with the same practicing firm either as a

sole proprietor, partner and/or employee".

(61st meeting of Council - December 30, 1980)

4.12

ATTESTATION OF PARTNERSHIP DEED FOR SUBMISSION TO THE INSTITUTE

The Executive Committee in its meeting held on April 1, 1989 decided that partnership deed submitted to the Institute by the practicing firms should not necessarily be attested by the Notary Public as the same is not required under the C.A Bye-Laws. Members therefore, have the option henceforth to get partnership deed certified by a Notary public or a member of the Institute other than the Partners listed in the Deed.

(Meeting of the Executive Committee April 1, 1989)

4.13

QUALITY CONTROL REVIEW PROGRAMME The Council has decided that firms/ sole proprietorships of practicing Chartered Accountants should furnish to the Institute a complete list of their audit clients as of 30th June (within 3 months) each year, and as and when required, to enable the Professional Standards Compliance Department to carry out its Quality Control Review (QCR) programme. Ail practicing members are directed to extend full cooperation to successfully implement the QCR programme so as to ensure maintenance of the highest standards in practice. Attention of members is drawn to Bye-Law 8 (3) of the Chartered Accountants Bye-Laws, 1983 which states that the validity of the Certificate (of practice) shall, on payment of the annual fee, and on fulfillment of the directives of the Council, be extended from time to time …………. Thus, in order to renew the Certificate of Practice, it is essential for members to comply with the above requirement. It was also decided that all firms / sole proprietorship of practicing Chartered Accountants may include a clause in their letter of engagement to all their limited liability company clients, stating that the working paper files pertaining to the client would be subject to Quality Control Review by the Institute of Chartered Accountants of Pakistan without any reference to the client.

(135th Meeting of the Council - 6 December, 1999)

4.14

CORPORATE GOVERNANCE The Council draws attention of members, who hold the position of director or chief executive officer or chief financial officer or any other position in a corporate entity, to their responsibility for ensuring good corporate governance in letter and spirit. This would particularly include establishing and maintaining a proper system of internal controls, as well as preparation and presentation of financial statements in conformity with International Accounting Standards applicable in Pakistan, the requirements of the Companies Ordinance 1984 and any other relevant corporate legal framework applicable to the organization in which they are working.

(135th meeting of the Council - 6 December 1999)

4.15

QUALITY CONTROL REVIEW The Council has reiterated that it is a professional requirement for practicing Chartered Accountants to submit their audit working paper files for a Quality Control Review (QCR) by the Institute. Thus practicing members are directed to only accept audit engagements, if the client gives consent to a QCR.

(142nd Meeting of the Council - 7 April , 2001)

4.17 (Revised 2014)

ABSENCE FROM OFFICE FOR A PRACTICING MEMBER

1. Pursuant to Bye-Law 7 read with Bye-Law 2(1)(i) of the Chartered

Accountants Bye-laws, 1983 practicing members are required to intimate

their principal place of business (registered address) to the Institute. It is

required that practicing members regularly attend the office at the

registered address notified in the Institute’s records to discharge their professional responsibilities. However, absence from office is permissible

under following exceptional circumstances:

(a) professional engagement as a practicing member;

(b) rest and recreation and medical treatment; not exceeding three

months in a financial year;

(c) training and education; in excess of three continuous months; and

(d) extraordinary situation such as prolonged adverse law and order

condition, political unrest.

The above will be subject to conditions that:

(i) the office is looked after by another qualified member of the

Institute, who is either a partner or in full time employment of

the concerned member; and

(ii) the period of continuous absence does not exceed six months.

If the period of continuous absence is expected to exceed six months,

the member shall obtain prior approval of the Executive Committee

of the Council by providing detailed justifications.

(e) temporary transfer/posting at foreign office of affiliated firm or Head

Office or Regional Office of Network to which the firm of

concerned practicing member belong, for the duration of

transfer/posting not exceeding 36 months with prior approval of the

Executive Committee of the Council;

Provided, that for the duration of such absence, the member shall not

certify any audit report.

4.17 (Revised 2014)

2. In determining period of continuous absence, attendance for a period of

less than 60 days shall not be considered.

3. All applications for approval of absence shall include a statement

confirming that the practicing member and/or his legal attorney or a duly

authorized member of the Institute would attend proceedings,

investigations and reviews carried out by the Institute and the Quality

Assurance Board along with a consent of such attorney or a member and a

statement that he has made adequate arrangement to facilitate any

proceedings, investigations and reviews by the Institute and the Quality

Assurance Board.

4. The practicing members shall maintain adequate record to demonstrate

compliance with this Directive.

5. The Council of the Institute is empowered to reconsider the renewal of

Certificate of Practice if the absence from office is not in compliance with

this Directive.

[Approved by the Council in its 253rd

Meeting held on May 8-10, 2014]

The Directive 4.17 before this revision reads as under:

4.17

ABSENCE FROM OFFICE FOR A PRACTICING MEMBER

1. Pursuant to bye-law 8 of the Chartered Accountants Bye-laws, 1983 practicing members are

required to be present at the office, identified in their practicing certificate. However, absence

from office in certain circumstance is allowed subject to the following situations:

(a) absence not exceeding three months (in a financial year);

(b) absence for a period exceeding three months in a financial year provided:

(i) the absence is for training or education; and

(ii) the office is looked after by another qualified member of the Institute, who is a

partner or in full time employment.

Provided that the period of such absence would not exceed one year.

2. Council is empowered to review the renewal of certificate practice if absence exceeds any of

the above prescribed period. This will require special approval from the Council.

(166th Meeting of the Council held on September 17-18, 2004)

4.18

PROCEDURES OF NETWORK AMONGST THE FIRMS/ PRACTICES REGISTERED WITH THE INSTITUTE OF

CHARTERED ACCOUNTANTS OF PAKISTAN

1. These Directives will apply to firms/ practices opting to form a network or to become part of the existing network and will be called as ‘Procedures for Network amongst the firms/ practices registered with the Institute of Chartered Accountants of Pakistan’.

2. Definition

2.1 Bye Laws means The Chartered Accountants Bye-Laws, 1983 as amended or added to from time to time.

2.2 Code of Ethics – Code of Ethics means the Code of Ethics issued by the Institute and decisions of the Council in this regard.

2.3 Council – Council means the Council of the Institute.

2.4 Firm

2.4.1 A sole practitioner, partnership or Corporation of professional accountants;

2.4.2 An entity that controls such parties; and 2.4.3 An entity controlled by such parties.

2.5 Formal Network - Formal network means a network amongst two or more firms/ practices registered with the Institute, where the object of network is to use the collective resources of the affiliates for execution of professional services of one or more types at one and/or at multi- locational points. The resources would include human, financial, technical and other logistic support required to execute the professional assignments. In such type of network, the common resources may be pooled and exhibited together before the service user as those belonging to one particular set of professionals.

4.18 2.6 Institute – Institute means the Institute of Chartered

Accountants of Pakistan.

2.7 Member in Practice: A member of the Institute shall be deemed “to be in practice” when individually or in partnership with chartered accountants in practice, he, in consideration received or to be received-

2.7.1 engages himself in the practice of accountancy, or 2.7.2 offers to perform services involving the auditing, or

verification of financial transactions, books, accounts, or records or the preparation, verification or certification of financial accounting and related statements or holds himself, out to the public as an accountant; or

2.7.3 renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data; or

2.7.4 render such other services as, in the opinion of the

Council, are or may be rendered by a chartered accountants in practice; and

2.7.5 the words “to be in practice” with their grammatical

variations and cognate expressions shall be construed accordingly.

Explanation – An associate or a fellow of the Institute who is salaried employee of a chartered accountant in practice or a firm of such chartered accountants shall, notwithstanding such employment, be deemed to be in practice for the limited purpose of the training of (students).

2.8 Ordinance – Ordinance means The Chartered Accountants

Ordinance, 1961. (X of 1961).

4.18

2.9 Network

“Network amongst two or more firms/ practices means an arrangement to facilitate the better functioning of the affiliate member firms/practices in the common economic interest of the profession and not for acquisition of any gain for the network. Such Network shall include the formal Network to use the collective resources such as turnover, infrastructures, manpower and location for execution of Professional services of one or more type.

[Explanation] –

2.9.1 An affiliation as referred to above shall also include: -

2.9.1.1 having an association with an accounting entity such that it results directly or indirectly in a common professional economic or beneficial interest.

2.9.1.2 one or more of the entities holding out that it is so affiliated or networked.

2.9.2 An entity shall not be treated as an affiliate of another merely for the reason that they

2.9.2.1 share professional knowledge and data base;

2.9.2.2 refer certain professional assignments or authorize the other to represent certain specific matters.

2.10 Practice A sole practitioner, a partnership or a corporation of Professional accountants which offers professional services to the public.

2.11 Referral Practice – Referral Practice means a practice to refer professional work by a firm to one of its associate/affiliate either situated at a different place or rendering professional services not provided by it, to the user of the services. The pre-dominant objective of such an arrangement is not to pool in their collective resources and exhibits them as those belonging to one particular set of professionals.

4.18

All other terms and expressions used but not defined in these rules shall have the same meaning as assigned to them in the Chartered Accountants Ordinance, 1961, Bye-Laws and Council Directives issued and amended from time to time.

3. Name of Network:

3.1 The Network may have distinct name from its constituent’s and from other networks. To distinguish a “Network” from a “firm” of Chartered Accountants, standards provided in Directive 4.06 shall be applicable to the name of the network. The prescribed format of application for approval of Name for Network is at Form NWA-1 (enclosed).

3.2 If the name is subsequently found to be undesirable then the Institute may require withdrawal of such name, which directions of the Institute shall be complied with forthwith.

3.3 The Council Directive 6.04 ‘Code of Ethics for Chartered Accountants’ permitting advertisement and use of logo will be applicable on networks

3.4 The firms/ practices constituting the network are permitted to print network name on their professional stationery.

4. Registration:

4.1 A Formal Network is required to be registered with the Institute in a prescribed Form NWA-2 (enclosed).

4.2 Referral Practice requires no registration.

4.3 It is for each firm/ practice to decide whether its affairs and relations with another firm results in creation of a Formal Network. The firms shall evaluate for themselves whether or not a formal relationship exists among them which warrants registration of network with the Institute.

4.18

4.4 If different firms/ practices are networked with a common Multinational Entity (MNE) then irrespective of the presence/absence of any ‘network’ relationship between the firms/ practices inter-se, they shall be considered as part of a network. As such, for these firms/ practices the registration with the Institute is not mandatory. It is only if these firms/ practices decide to constitute a Formal Network, then the registration with the Institute is mandatory.

5. Ethical Compliance: Once the network is registered with the Institute, it will be necessary for such a network to comply with all applicable ethical requirements prescribed by the Institute from time to time in general and the following requirements in particular: -

5.1 If one firm of the network is the statutory auditor of a listed entity then the constituent firms directly/indirectly should not accept the internal audit or book-keeping or such other professional assignments which are prohibited for the statutory auditor firm as per clause (xl) of Code of Corporate Governance.

5.2 Clause (xli) of the Code of Corporate Governance relating to rotation of firm would be equally applicable on net work.

5.3 The Constituent member firms/ practices of a Network and the Network shall comply with all the Ethical Standards prescribed by the Council from time to time.

6. Quality Control:

It is the responsibility of Individual firms/ practices constituting the network to obtain satisfactory ‘Quality Control Review’ rating from the Institute. Firms/ practices not having satisfactory QCR rating but are part of any network of firms/ practices in which other firm(s) would have satisfactory QCR rating(s) are not allowed to accept and conduct audit of listed companies in strict compliance of the requirements of clause (xxxvii) of the Code of Corporate Governance.

4.18

7. Consent of Client: The network firm shall obtain consent of the client to engage other network firms in discharging the professional assignments.

8. Constitution of Network:

8.1 Proprietory/partnership firm(s) are permitted to form a Network.

8.2 Proprietory/partnership firms are allowed to join only one Formal network.

8.3 A Firm/ practice will be allowed to join only one formal network.

9. Object of Network: The Network itself will not carry on any business for acquisition of gain for itself and only act as a facilitator for its members/constituent Member firms/ practices to pursue their professional jobs.

10. Responding to Enquiries: Only one firm can apply on behalf of the network showing the collective strength of all the constituent firms/ practices of the network, when responding to any enquiry.

11. Issuing Reports: Only the constituent member firm(s)/ practice(s) which is/are part of the network, and originally undertaken the assignment in its/ their own name is/ are eligible to issue/sign/attest any certificate/Report/professional document/assignment irrespective of the fact that resources from other constituent firms have also been engaged on the assignment.

4.18

12. *Violation of Ordinance: In case of alleged violation of the provisions of the Ordinance, Bye-laws, Directives/ guidelines laid down by the Council from time to time and Code of Ethics by the Network firm, the proprietary/partnership firm(s) constituting the Network which originally undertakes the assignment as per paragraph 11 would be answerable. Thus, the responsibility would rest with the Engagement Partner who signs the report.

13. Exit From Network:

A constituent Member firm of a Network may after clearing dues of network, if any, exit from the network by sending the declaration in Form NWA-3 (enclosed) at the registered office of the network and to the Institute. The concurrence/acceptance of the same by other firms/ practices forming part of the network firm shall not be required.

14. Framework of Internal Byelaws of Network requiring Registration: To streamline the networking, a network shall formulate operational byelaws. Byelaws may contain the following clauses on which the member firms/ practices of the network may enter into a written agreement among themselves (a copy whereof should be sent to the Institute):

14.1 Appointment of a Managing Committee, from among the managing partners of the member firms/ practices of the network and the terms and conditions under which it should function. The minimum and maximum number of members of the Managing Committee shall also be agreed upon.

14.2 Administration of the network.

14.3 Contribution of membership fees to meet the cost of the administration of the network.

* Rule 12 was amended by the Council in its 200 th Meeting held on October 16, 2008.

4.18

14.4 Dispute settlement procedures through arbitration, Alternate Dispute Resolution (ADR) and mediation.

14.5 Development of training materials for members of the network.

14.6 Issue of News-letters for staff and clients.

14.7 Development of software’s for different types of assignments.

14.8 Development and maintenance of data bases relevant for different types of assignments.

14.9 Setting up Library.

14.10 Appointment of a Chief Executive/ Technical Director to whom references can be made.

14.11 Determining the methodology for drawing resources from each member firm.

14.12 Determining compensation to member firms/ practices for resources to be drawn from them.

14.13 Peer review of the member firms/ practices.

14.14 Development of a disclaimer statement such that the member firms of the network are independent firms and are only associated/ affiliated with the network and the network itself provides no client services. No member firm has any authority to obligate or bind any other network member firm vis-à-vis third parties, nor does network itself have any such authority to obligate or bind any of its member / constituent firm.

These clauses are illustrative.

(ICAP 193rd Council Meeting – November 7, 2007)

Form ‘NWA-1’

APPLICATION FOR APPROVAL OF NAME FOR NETWORK OF FIRMS/ PRACTICES

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN [See Rule 3 of Procedures of Network amongst the firms/ practices registered withThe Institute of Chartered Accountants of Pakistan]

1. Proposed name of Network (in order of preference) if the Network has a distinct name: a)

b)

c)

d)

2. Name(s) of the firm(s)/Member(s) forming network

Firm Name/ Member Name

Membership No.

a)

b)

c)

d)

3. Address of the Office of the Network:

4. We hereby declare that the above firm(s)/ practice(s) proposed to have entered into an understanding to form a network in accordance with Rules of Network amongst the firms/ practices registered with The Institute of Chartered Accountants of Pakistan and further affirm and confirm that the partner signing the application has been duly authorized by the other partners of the respective firms/ practices.

Place : ............................

Name(s) with Membership No(s) and signature(s) of duly authorized Partner(s)/Proprietor(s) of the firms/ practices/ Member constituting Network

Date : .............................

Form ‘NWA-2’

DECLARATION FOR REGISTRATION OF FORMAL NETWORK AMONGST FIRMS/ PRACTICES REGISTERED WITH THE

INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN [See Rule 4 of Procedures of Network amongst the firms/ practices registered with The Institute of Chartered Accountants of Pakistan]

PARTICULARS OF NETWORK

1. Name of the Network

2. Address of the Network 3. Names and addresses of firms/ practices/Member constituting the

Network

Names and addresses of Membership No. Firm(s)/Member(s)

4. (a) Date of formation of Network (b) Date on which present network arrangement was entered into

5. We undertake to comply with the guidelines/directions laid down by the Council regarding Network from time to time.

We hereby declare that:

(a) the network constituents have entered into an agreement to form this network.

(b) that the partner(s) signing this declaration has been duly authorized by the other partners of the firm.

Place : .............................

Name(s) with Membership No(s). and signature(s) of duly authorized Partner(s)/ Proprietor(s) of the firms/ practices/

Date : .............................

Form ‘NWA-3’

DECLARATION FOR DISSOCIATION FROM A NETWORK

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN

[See Rule 13 of Procedures of Network amongst the firms/ practices registered with The Institute of Chartered Accountants of Pakistan]

1. Name of the Network 2. Address of the Network 3. Names and addresses of firms/ practices constituting the Network

Names and addresses of Membership No. Firm(s)/Member(s)

4. Name and address of the firm/member willing to dissociate from the

Network

Name and address of Membership No. Firm(s)/Member(s)

In pursuance to the Rule 13 of Rules of the Network issued by The Institute of Chartered Accountants of Pakistan, We/I …………….hereby declare our dissociation from the Network w.e.f. ………………. I hereby declare that I have been duly authorized by the other partners to issue this declaration.

Place : ........................... Name with Membership No(s). and signature(s) of duly authorized Date : ........................... Partner(s)/Proprietor(s) of the firm/ Member dissociating from the Network

4.19

RETENTION AND CUSTODY OF WORKING PAPERS BY

CHARTERED ACCOUNTANT FIRMS

In exercise of the powers conferred by Section 27(2)(kk) of the Chartered

Accountants Ordinance, 1961 read with Bye-Law 129A of the Chartered

Accountants Bye-Laws, 1983, the Council of the Institute has approved this

Directive for compliance by the members.

It is observed that there is no mandatory requirement for the preservation

period of working paper files/documentation by the firms of Chartered

Accountants in respect of assignments pertaining to audit, review of financial

statements and other assurance and related service engagements.

Accordingly, the Council of the Institute has considered the matter and

decided to prescribe the following requirements for the practicing Chartered

Accountants, with immediate effect, in relation to the retention and safe

custody of their working papers.

In case of failure of the firm to comply with the requirements of this

Directive, all the partners of the firm will be held responsible for non-

compliance under the provisions of the Chartered Accountants Ordinance,

1961:

1) The Chartered Accountant firms shall establish policies and

procedures for the retention of engagement documentation for a period

sufficient to meet the needs of their practice and in accordance with

the relevant laws and regulations. However, the retention period for

audit engagements should not be less than six years from the date of

signing of the auditor’s report or, if later, the date of the group

auditor’s report.

2) The auditor should not delete or discard audit documentation which

forms the basis of forming an opinion on the financial statements

before the end of its retention period.

3) In case a report has not been issued in connection with an engagement,

or incase of withdrawal of the engagement, the audit documentation

must be retained for two years from the date that fieldwork was

substantially completed.

4.19

4) Unless otherwise agreed amongst the partners of the firm in writing, in

case of re-organization, resignation or retirement of partners (changes

in composition, changes in name of firm etc.), the responsibility for

retention of working papers will rest with the partners carrying the

name of the firm.

5) In case of splitting of the firm, unless otherwise specifically agreed by

the partners in writing, the engagement partner of the assignment will

be responsible for the retention and safe custody of the working

papers.

6) In case any proceedings of misconduct or other legal proceedings are

in process against the auditor the relevant records shall be maintained

and retained till the completion of such proceedings or the above

mentioned period of six years whichever is later.

Additional Guidance may be obtained from the International Standard on

Auditing (ISA) 230 (Audit Documentation) and relevant paragraphs of

International Standard on Quality Control (ISQC) 1 regarding the retention

and safe custody of working papers.

This Directive of the Council is applicable with effect from July 1, 2014.

[Approved by the Council in its 253rd

Meeting held on May 8-10, 2014]

4.20

DIRECTIVE ON CONDUCTING NON-STATUTORY AUDITS /

ASSIGNMENTS

In exercise of the powers conferred by Section 27(2)(kk) of the Chartered

Accountants Ordinance, 1961 read with Bye-Law 129A of the Chartered

Accountants Bye-Laws, 1983, the Council of the Institute has approved this

Directive to provide guidance to the practicing members during the conduct of

non-statutory audit of financial statements and other assignments of their

clients in the nature of assurance and related services.

It has been noted in certain instances that the practicing members do not

follow the applicable assurance or related services framework while

conducting non-statutory audits and other professional assignments which are

performed for internal purposes and/or on specific request of their clients.

Consequently, members are hereby advised to follow and strictly comply with

all the provisions of the applicable standards and the relevant framework

while performing professional services for their clients which are outside the

scope of statutory audits. Furthermore, the terms of the engagement including

the nature of the assignment, its key deliverables and the framework which

will be followed should be documented in the form of an Engagement Letter

which is duly agreed by the client.

In case of an assignment of compilation or preparation of financial statements

of the client, the provisions of the International Standard on Related Services

(ISRS) 4410 (relating to Compilation engagements) have to be followed by

the members. In the case of engagement to perform Agreed upon Procedures,

members are required to follow the provisions of ISRS 4400 [Engagements to

Perform Agreed-Upon Procedures regarding Financial Information]. Further,

the International Standards on Assurance Engagement (ISAEs) are to be

applied in assurance engagements other than audits or reviews of historical

financial information. The Auditing Technical Release (ATR) 17 also

provides guidance on the application of appropriate auditing standards in

carrying out professional engagement by the auditor.

It is mentioned that non-compliance with the directives of the Council results

in professional misconduct under Clause (3) of Part 4 of Schedule I of the

Chartered Accountants Ordinance, 1961. Therefore, members are advised to

take note of the above in order to avoid violation of relevant laws and

regulations.

[Approved by the Council in its 266th Meeting held on July 24-25, 2015]

4.21

DIRECTIVE ON STANDARDIZATION OF LETTERHEADS OF

AUDIT FIRMS

The Council of the Institute has approved this Directive in exercise of the

powers conferred on it by Section 27(2)(kk) of the Chartered Accountants

Ordinance, 1961 read with Bye-Law 129A of the Chartered Accountants Bye

Laws, 1983. This Directive is to be read in conjunction with the Bye-Law 8 of

the Chartered Accountants Bye-Laws, 1983 and Institute’s Directive 4.06 “Styling of Firms”.

This guidance applies to all members in practice operating as sole proprietor,

partnership firms or under network of firms.

For the purposes of this Directive, the term “letterhead” means the member's

or member firm's notepaper and documents used by the member or member

firm for communicating with clients or other parties including electronic mail.

“Electronic letterhead” is not a substitute for printed letterhead but is intended

to be used for letters and documents that are transmitted electronically via fax

or e-mail. Printed letterhead should be used for official correspondence

intended to be sent through traditional mail.

The firms are directed to use same letterhead formats at all of their offices

regardless of the nature of arrangement between the partners. The name of the

firm printed on the letterhead should be the same as that appearing in the

Institute’s records. In case of association with any foreign firm or network of

firms, the nature of the relationship between the Pakistani firm and the foreign

firm or network of firms can also be mentioned on the letterheads and other

stationery of the firm along with the name of the firm. However, the firm

should ensure that local name of the firm should be more prominent viz a viz

the name of foreign firm/network. Guidance in this regard can be obtained

from the Directive 4.06 [Styling of Firms] of the Council.

Firms should ensure that only the name(s) of the partners or that of the sole

proprietor should appear on the letterheads. No person named on the

letterhead of a firm should be described by a title, description or designatory

letters to which such person is not entitled. A letterhead should also include

the address and telephone numbers of the firm’s principal place of business

and may include the address of its regional offices(es), and if the firm has a

website, its web address as well.

4.21

A firm may decide to use its logo on the letterhead, however in such cases,

firms are only allowed to use one logo on all its letterheads and other

stationery.

[Approved by the Council in its 266th

meeting held on July 24 and 25, 2015]

4.22

ENGAGEMENT OF CHARTERED ACCOUNTANTS IN PRACTICE

IN OTHER OCCUPATIONS

The Council of the Institute has approved this Directive in exercise of the

powers conferred on it by Section 27(2)(kk) of the Chartered Accountants

Ordinance, 1961 read with Bye-Law 129A of the Chartered Accountants Bye

Laws, 1983. This Directive is to be read in conjunction with the Bye-Law 8 of

the Chartered Accountants Bye-Laws, 1983 and Directive 4.09 of the

Institute.

A chartered accountant in practice may engage in the following occupations

without obtaining the prior approval of the Council:-

(a) Employment under chartered accountants in practice or firms of

such chartered accountants.

(b) Private tutorship.

(c) Attending classes and appearing for any examination, either

academic or accountancy or any examination relating to the other

professions and obtaining membership of such bodies/associations.

(d) Authorship of books

(e) Appearing before any Court of Law for representing clients etc., in

respect of the "other functions" as stated in the Bye-Laws of the

Institute, if so eligible.

(f) Proprietorship, partnership or directorship of educational and

training institutions extending professional or business education and

training.

(g) Part-time lecturer-ship in Universities or other institutions

including those relating to or accredited by the Institute or those run

under the auspices of the Institute or the Regional

Committees.

4.22

(h) Acting as examiner/paper-setter for educational and professional

institutions and to be a member of Universities/Colleges, Committees,

Board etc.

(i) Honorary editorship of professional journals.

(j) Holding membership/office in any charitable, religious, social or

educational organization without remuneration.

(k) Engaging in research and report writing and assisting national and

international organizations in the preparation of their research reports.

(l) Accepting directorship of any company as non-executive director.

(m) Holding public elected offices such as Member Provincial

Assembly, Member National Assembly, Senator etc.; or offices such

as Special Assistant or Advisor to a Minister or Prime

Minister etc.

It should be noted that the engagement of a chartered accountant in practice in

the above occupations shall not be deemed to be in contravention of the Bye

Law 8 of the Chartered Accountants Bye Laws and shall also not result in

professional misconduct as per Clause (10) of Part 1 of Schedule I of the

Chartered Accountants Ordinance, 1961, with reference to the requirement of

being in main occupation.

This Directive is being issued on transitionary basis and the Council of the

Institute is considering appropriate provisions to address the issue of main

occupation on permanent basis.

[Approved by the Council in its 266th

meeting held on July 24-25, 2015]

Directive 4.23

ENSURING AUDIT QUALITY

1. The audit and assurance professionals are the stewards for building trust, ensuring transparency and promoting good governance - the basic elements for corporate success and safeguarding public interest. Audit has a pivotal role in strengthening the bond between corporate structure and investors for any flourishing economy. In the international arena the new buzz word is ‘Audit Quality’.

2. Global focus is moving towards gauging Audit Quality Indicators which entail time spent by senior audit team members, years of audit experience and industry specialization, average training hours and industry specific training, independence and compliance with regulatory requirements and external inspection results.

3. Audit of financial statements in Pakistan is required to be carried out in accordance with the requirements of International Standards on Auditing (ISAs) as applicable in Pakistan.

4. The Council of the Institute of Chartered Accountants of Pakistan (ICAP) requires the firms to mandatorily comply with ISQC 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information and Other Assurance and Related Services Engagements, ISA 220 Quality Control for Audits of Historical Financial Information, ISA 230 Audit Documentation etc issued by IFAC. These standards require extensive documentation of audit procedures and recruitment of qualified staff.

5. The Quality Control Framework has also been recently revised with enhanced requirements for the practicing members/firms. Further, the Institute also collaborated with the Government in the establishment of an Independent Audit Oversight Board of Pakistan. Hence, the cost to perform audit by the firms has significantly increased. It is a challenge for firms to ensure that quality control procedures are adequately complied within the limited funds and resources.

6. It is acknowledged that the level of fee is to be mutually agreed between the auditor and the client, which largely depends upon the volume and complexity of work involved and estimated time to be incurred on the audit engagement. The Council whilst recognizing this principle is however, of the view that there has to be some threshold provided for the profession of auditing to properly develop and work in public interest for delivering quality audit and meeting the high level of expectations. The Council had also carried out a study of audit fees prevalent in other jurisdictions (India, Sri Lanka, Malaysia, UK) and noted that the audit fees in Pakistan are considerably lower.

7. The combination of falling audit fees and decreased audit effort can lead to reduced audit quality. This impact can be especially serious for high risk public company audit clients.

8. To set a benchmark for quality audit the Council believes the fact that audit cost has a direct linkage with audit quality. Therefore, to determine optimal audit fee, the factors necessary to be considered are: past trend of audit fees charged, analysis of estimated audit time spent, cost of resources including involvement of various levels of professional personnel required in carrying out audit of financial statements and the prevailing remuneration of professional personnel. Accordingly, in best public interest, development of the audit profession and taking into account the above factors the Council has approved the attached Schedule of Audit Fee for members in practice as recommended reference fee.

In case of an existing audit client, the present audit fee is recommended to be enhanced to the level provided in the Schedule of Audit Fee mentioned above over a period of two years with mutual consent. It is proposed that in the first year the enhanced fee is more or equal to 75% of the fee recommended in the ‘Schedule of Audit Fee’.

9. The Schedule of Audit Fee will not be referred for audit engagements of clients in the pre-incorporation/pre-operation stages or in case of sick project or closed operations or discontinuation of business.

10. The Schedule of Audit Fee is exclusive of the below mentioned additional services to be rendered by a statutory auditor under the Companies Act 2017, Code of Corporate Governance and for any other certifications and the professional fee for such services shall be charged separately by mutual consent.

Issue a Review Report on Statement of Compliance with Best Practices of Corporate Governance

Issue Review Report on half – yearly financial statements

Special reports/certification required by regulators over and above normal scope of audit

11. The fee is exclusive of traveling and hotel expenses, out of pocket expenses and other incidental costs which would be reimbursable to auditors as per the terms of arrangement.

12. The practicing members may choose to undertake the audit on a token fee or on an honorary basis or voluntarily in case of a religious or charitable institution or a company “not for profit” without compromising on the quality of audit work.

(311th meeting of the Council – March 21-22, 2019)

RECOMMENDED

SCHEDULE OF AUDIT FEE

*Excluding Medium Sized and Small Sized Companies having paid up capital less than three million.

Note: The terms Public Interest Company (PIC)”, “Large Sized Company (LSC)”, “Medium Sized Company” (MSC) and “Small Sized Company” (SSC) shall have the same meaning as defined in the Third Schedule of the Companies Act, 2017.

Type of entity Fee

Listed companies

Turnover up to Rs.500 million Rs. 600,000

Turnover over Rs.500 million up to Rs.1 billion Rs. 700,000

Turnover over Rs.1 billion up to Rs.50 billion Rs.700,000 plus Rs.100,000 for every 1 billion increase in turnover

Turnover over Rs.50 billion Rs. 6,400,000 or fee based on engagement hours computed based on hourly charge out rate/fee amount agreed with client whichever is higher

Large Sized Companies / Public Interest other than listed

Turnover up to Rs.500 million Rs.400,000

Turnover over Rs.500 million up to Rs.1 billion Rs.600,000

Turnover over Rs. 1 billion up to Rs.20 billion Rs.600,000 plus Rs.75,000 for every 1 billion increase in turnover

Turnover above Rs.20 billion Rs.2,250,000 or fee based on engagement hours computed based on hourly charge out rate/fee amount agreed with client whichever is higher

Medium Sized Companies* Rs.300,000

Small Sized Companies* Rs.175,000

4.24 FRAMEWORK FOR REGULATION AND SUPERVISION OF CHARTERED ACCOUNTANTS TO COMPLY WITH ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM REQUIREMENTS

The Institute, under section 5(7)(a) of the Anti-Money Laundering Act, 2010 (AML Act) has been designated as an Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) Regulator/Supervisor of its members through the Finance Division, Government of Pakistan notification dated December 23, 2019. As a Self-Regulatory Body (SRB), the Institute is to prescribe regulatory and supervisory measures for the chartered accountants in practice to ensure compliance with the provisions and obligations specified under the AML Act. In this regard the Council has approved the “Framework for Regulation and

Supervision of Chartered Accountants to Comply with Anti-Money Laundering and Countering the

Financing of Terrorism Requirements” (the AML Framework) which is based on the Anti-Money

Laundering and Combating Financing of Terrorism Guidelines for Designated Non-Financial Business

Professions issued by the Financial Monitoring Unit (FMU). The AML Framework outlines:

(a) Scope of the AML Framework; (b) AML/CFT requirements for Institute’s members in practice; (c) Institute’s role as Self-Regulatory body of its members for AML/CFT purposes; and (d) AML Supervisory Board’s role to coordinate with the AML Supervisor.

The AML Framework is effective from March 5, 2020.

The AML Framework is enclosed and can also be accessed at: https://www.icap.org.pk/aml-

supervision/.

(324th

meeting of Council – February 29, 2020)

https://www.icap.org.pk/aml-supervision/

https://www.icap.org.pk/aml-supervision/

FRAMEWORK FOR REGULATION AND SUPERVISION OF

CHARTERED ACCOUNTANTS TO COMPLY WITH ANTI-MONEY

LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM

REQUIREMENTS

(THE AML FRAMEWORK)

February 29, 2020

Contents

Page

Preamble 1

The Institute as AML/CFT Regulator/Supervisor of its members 1

Scope of the AML Framework 1

Definitions 2

AML/CFT Requirements 4

Transitional Provisions 5

Flow charts Scope of the AML Framework 6 AML Supervisory Model 7 Institute’s AML Self-Regulatory System 7 Obligations of the Reporting Firms 8

Section I - Risk Assessment and AML/CFT Programme 9

Section II - Customer Due Diligence 11

Section III - Enhanced Customer Due Diligence 16

Section IV - Record Keeping 19

Section V - Institute’s AML Self-Regulatory System 20

Section VI - Coordination with the AML Supervisor 23

Appendix A: AML Supervisory Board 24

Appendix B: Forms Form A

Form B

The AML Framework

The Institute of Chartered Accountants of Pakistan 1

PREAMBLE

Pakistan is obligated to comply with the "International Standards on Combating Money Laundering and the

Financing of Terrorism & Proliferation" issued by the Financial Action Task Force (FATF Recommendations). Pakistan has enacted the Anti-Money Laundering Act, 2010 (the AML Act) and Anti-Terrorism Act, 1997.

The AML Act and FATF Recommendations place obligations on the accountancy profession.

Pakistan is also subject to Financial Action Task Force (“FATF”) mutual evaluations on the adoption and implementation of FATF Recommendations.

In the recently concluded FATF Mutual Evaluation Report of Pakistan (issued in October 2019) Pakistan’s

Designated Non-Financial Businesses and Professions (“DNFBPs”), which include the accountancy sector, have been evaluated as ‘Non-Compliant’ with the requirements of the FATF Recommendations.

The basic intent behind the AML Act and FATF Recommendations, as it relates to accounting professionals is consistent with their ethical obligations as professionals, namely to avoid assisting criminals or facilitating criminal activity.

The Anti-Money Laundering (“AML”) and Counter Financing of Terrorism (“CFT”) legislations have implications on the responsibilities of chartered accountants, including the risk of criminal liability on chartered accountants for non-compliance.

THE INSTITUTE AS AML/CFT REGULATOR/SUPERVISOR OF ITS MEMBERS

The Institute, under section 5(7)(a) of the AML Act, has been designated as an AML/CFT Regulator/Supervisor of its members through the Finance Division, Government of Pakistan notification dated December 23, 2019. Thereby requiring the Institute to act as a Self-Regulatory Body (SRB). Further, through the above-mentioned notification Securities and Exchange Commission of Pakistan has been designated as AML/CFT Supervisor of the Institute. As a SRB, the Institute is obligated to prescribe regulatory and supervisory measures for the chartered accountants in practice falling under the scope of this Framework, to ensure compliance with the provisions and obligations specified under the AML Act. In this regard the Financial Monitoring Unit (FMU) has issued Anti-Money Laundering and Combating Financing of Terrorism Guidelines for Designated Non-Financial Business Professions (FMU Guidelines). The FMU has instructed the AML/CFT Regulator/Supervisor, including the Institute, to follow these guidelines for issuing their own AML/CFT regulations/framework. The scope of the Institute’s “Framework for Regulation and Supervision of Chartered Accountants to Comply with Anti-Money Laundering and Countering the Financing of Terrorism Requirements” (the AML Framework) is given in the next sub-sections.

The FMU Guidelines also require that the Institute shall prevent criminals as well as persons proscribed and their known associates as designated under United Nations (Security Council) Act 1948 and/or Anti-Terrorism Act 1997 from becoming professionally accredited or holding a management function in or becoming a beneficial owner of the Firms.

SCOPE OF THE AML FRAMEWORK

The Institute’s AML Framework deals with the responsibilities of the Institute’s Members in Practice that in the ordinary course of business are engaged in the rendering of “Accountant” and “Trust and Company

Service Provider” services, as specified. Such Members in Practice have to comply with specific customer due diligence, record keeping and other AML/CFT Requirements.

The AML Framework


DEFINITIONS

For the sake of clarity, the words and phrases below, as used in this Framework, have the following meaning:

(i) “Accountant” – means sole practitioners, partners or employed professionals within professional firms when they prepare for or carry out transactions for their client concerning:

(a) The buying and selling of real estate;

(b) Buying and selling of business entities;

(c) The managing of client money, securities or other assets;

(d) The opening or management of bank, savings or securities accounts;

(e) The organisation of contributions necessary for the creation, operation or management of companies; or

(f) Creation, operation or management of legal persons or arrangements.

Explanation: The term “Accountants” is not meant to refer to ‘internal’ professionals that are

employees of other types of businesses, nor to professionals working for government agencies, who may already be subject to AML/CFT measures.

(ii) “AML Act” - means the Anti-Money Laundering Act, 2010 (VII of 2010).

(iii) “AML & CFT Regulator/Supervisor”- means designated regulatory or supervisory authority for relevant DNFBPs who are members of it, or regulated or supervised by it.

(iv) “Beneficial owner” means the natural person who ultimately owns or controls a customer or the

person on whose behalf a transaction is being conducted and includes legal heir(s) and the person who exercise ultimate effective control over a person.

(v) “Customer Due Diligence” or CDD - means

(a) Identifying the customer and verifying the customer’s identity on the basis of documents, data or

information obtained from customer and/or from reliable and independent sources;

(b) Identifying, where there is a beneficial owner who is not the customer, the beneficial owner and taking adequate measures, to verify his identity so that the DNFBP is satisfied that it knows who the beneficial owner is, including, in the case of a legal person, trust or similar legal arrangement, measures to understand the ownership and control structure of the person, trust or arrangement;

(c) Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship; and

(d) Monitoring of accounts/ transactions on ongoing basis to ensure that the transactions being conducted are consistent with the DNFBP’s knowledge of the customer, their business and risk

profile, including, where necessary, the source of funds and, updating records and data/ information to take prompt action when there is material departure from usual and expected activity through regular matching with information already available with the DNFBP.

(vi) “CTR” - means report on currency transactions exceeding such amount as may be specified by the

National Executive Committee by notification in the official Gazette.

(vii) “DNFBPs” - means Designated Non-Financial Businesses and Professions as defined in the AML Act.

(viii) “Enhanced Due Diligence” or EDD - means diligence in addition to CDD and may be carried out in

case of high risk customers.

The AML Framework


(ix) “Firm” – means and includes Reporting Firms and Practicing Firms. (x) “FMU” - means the Financial Monitoring Unit established under section 6 of the AML Act. (xi) “Legal Person” - means body of persons or an entity (as a corporation, company, Non-Profit

Organization (NPO), Non-Governmental Organization (NGO), Trust, Charity, Society, Association, club etc., established under any law and considered as having many of the rights and responsibilities of a natural person and especially the capacity to sue and be sued.

(xii) “Member in Practice” – means a member of the Institute having certificate of practice and:

(a) Practicing as a "Chartered Accountant" individually (i.e. as a sole-proprietor) or in partnership

with chartered accountants.

(b) Practicing as a "Management Consultant".

(xiii) “Person” - includes an individual, association, authority, company, firm, institutions, partnership, society, trust or other entities.

(xiv) “Politically exposed persons” or “PEPs” - means any person entrusted with a prominent public function by the State of Pakistan, a foreign country or an international organization and includes Heads of state or government, and members and senior officials of legislature, judiciary, executive, military and regulatory authorities, and senior executives of corporations, departments or bodies that are owned or controlled by the state.

(xv) “Practicing Firm” – means a Member in Practice, who is not subject to the AML Framework except

to the extent of filing the returns required under paragraphs 65 to 68 below. (xvi) “Reporting Firm” – means a Member in Practice who is providing services as an Accountant or Trust

and Company Service Provider. (xvii) “Risk”- refers to risk associated with money laundering, financing of terrorism and proliferation

finance; (xviii) “STR” - means the report on suspicious transaction specified under Section 7 of the AML Act 2010. (xix) “Trust and Company Service Provider” – means a Member in Practice providing the following

services:

(a) Forming companies or other legal persons;

(b) Acting, or arranging for another person to act:

(i) as a director or secretary of a company;

(ii) as a partner of a partnership; or

(iii) in a similar capacity in relation to other legal persons;

(c) Providing a registered office, business address, correspondence or administrative address or other related services for a company, partnership or any other legal person or legal arrangement; and

(d) Acting, or arranging for another person to act, as a trustee of an express trust or similar legal arrangement.

The AML Framework


AML/CFT REQUIREMENTS

1. The Reporting Firm is required to: (a) Assess risks of money laundering and terrorist financing and implement an AML/CFT program to

mitigate and manage the risks, as set out in Section I of the AML Framework. (b) Perform customer due diligence, as set out in Section II of the AML Framework. (c) Apply enhanced due diligence measures in certain cases indicative of higher AML/CFT risks, as

set out in Section III of the AML Framework. (d) Keep record in accordance with the requirements set out in Section IV of the AML Framework.

2. The Reporting Firm shall not establish a business relationship with following entities and/or individuals:

(a) Designated by, or under the authority of, the United Nations (“UN”) Security Council under

Chapter VII of the Charter of the UN, including in accordance with UN Security Council Resolutions.

(b) Proscribed under the Anti-Terrorism Act, 1997 (XXVII of 1997) or any other law relating to terrorism.

(c) Persons acting on behalf of or at the direction of, above (a) and (b).

3. The Reporting Firm shall be required to submit Suspicious Transaction Report (“STR”) and Currency Transaction Report (“CTR”) to the Financial Monitoring Unit (“FMU”) notified by the Federal Government in accordance with AML Act. (a) If a Reporting Firm suspects or has reasonable grounds to suspect that funds are the proceeds of

a criminal activity, or are related to terrorist financing, it is required to report promptly its suspicions to the FMU established under section 6 of the AML Act.

(b) The Reporting Firm shall report all suspicious transactions including attempted transactions to

FMU regardless of the amount of the transaction. (c) The Reporting Firm shall report CTR to FMU for every cash transaction exceeding the prescribed

limit made through the Reporting Firm, in accordance with Section 7(3) of the AML Act.

(d) The Reporting Firm, its senior management and employees shall not disclose to any person the fact of filing of a STR or CTR with FMU, except where so required by law.

4. Members in Practice shall be subject to the Institute’s AML Review and Validation System set out in Section V of the AML Framework.

5. The Reporting Firm, its partner(s) and employee(s) shall not be in breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, if they report their suspicions in good faith to the FMU, even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred. The Reporting Firm, including any of its partners or employees, are required not to disclose (“tipping-off”) the fact that a STR or related information is being filed with the FMU. STR shall have the same meaning as assigned to it in the AML Act.

The words and expressions used in the AML Framework but not defined shall have the same meaning as assigned to them under the AML Act and Chartered Accountants Ordinance, 1961.

The AML Framework


TRANSITIONAL PROVISIONS

6. The transitional provisions of the AML Framework would be applicable, as explained below: (a) The existing clients mean those clients of the Reporting Firms to which the services of Accountant

or Trust and Service Company Services are being provided as of the effective date of this Framework. The new clients mean clients of the Firm with which business relationship is established on or after the effective date of this Framework.

(b) The Reporting Firms shall apply the customer due diligence measures on all existing clients, in

accordance with this Framework. The customer due diligence measures include screening of existing clients for identification of any proscribed or designated person. Further, the Reporting Firms shall document and retain the record of the customer due diligence measures.

(c) The Reporting Firms, in case of any adverse customer due diligence of the existing clients, shall

follow the relevant requirements of the AML Framework. (d) All Firms shall submit ‘Form A’ of Annual Return as mentioned in paragraph (65), based on their

existing clients (i.e. clients as of the effective date of the Framework) and new clients (i.e. clients on or after the effective date of the AML Framework to June 30, 2020). The Form A shall be submitted by July 31, 2020.

(e) All Reporting Firms shall submit ‘Form B’ of Annual Return as mentioned in paragraph (65), for all existing clients (i.e. clients as of the effective date of the Framework) and new clients (i.e. clients on or after the effective date of the AML Framework to June 30, 2020). The Form B shall be submitted by August 15, 2020.

(f) The Reporting Firms would be subject to the first annual review under the AML Framework, based

on the Form B submitted above. Section V of the AML Framework would be applicable, under the transitional provisions to the Firms.

The AML Framework


FLOW CHARTS

SCOPE OF AML FRAMEWORK

Are you providing any of following specified services?

Act as formation agent of legal persons or legal arrangements

or

Act as, or arrange for a person to act as, a nominee director, in relation to legal persons or legal arrangements

or

Manage client funds (other than sums paid for professional services)

or

Manage client accounts, securities or other assets

or

Provide real estate agent work to effect a transaction

or

Provide a registered office or business address, a correspondence address or an administrative address for a company or partnership, or for any legal person or legal

arrangement

or

Engage in or give instructions on behalf of a client to another person for:

A transfer of beneficial interest in land or other real

estate property;

A transaction on behalf of any person for buying or selling

or transferring of a business or legal person or any other

arrangement; or

A transaction on behalf of a client in relation to creating,

operating and managing a legal person or any other legal

arrangement

You are not in scope of this AML

Framework You are in scope of this AML Framework

as a Reporting Firm

Yes No

Yes No

Are you in Practice?

The AML Framework


AML SUPERVISORY MODEL

INSTITUTE’S AML SELF-REGULATORY SYSTEM

Performs

AML

validation

reviews of

Reporting

Firms

AML Supervisor of accountancy sector

AML Supervisory Board of the Institute

Investigation

Committee of the

Institute

Practicing Firms

Institute supervises and monitors the Practicing

Firms for AML/CFT purposes

Institute can take disciplinary measures for non-compliance

under this Framework

Oversight of the Institute’s

AML Self-Regulatory System

Only those practicing firms that

provide specified services to their

clients

AML Supervisor of accountancy

sector

Refers significant matter of non-

compliance arising under this Framework

Submits annual report,

coordinates and provides

information about

Institute’s AML Self-

Regulatory System

Issues

Report on

AML

Validation

Reviews of

Reporting

Firms

Practicing Firms

Monitoring and supervision of

Members in practice under

this Framework

Submit

‘Form A’

under this

Framework

Reporting Firms

Submit

‘Form B’

under this

Framework

AML Supervisory Board of the Institute

AML Supervision Department

Functionally reports

to the AML

Supervisory Board

The AML Framework


OBLIGATIONS OF THE REPORTING FIRMS

Carry out assessment of money laundering

and terrorist financing risks

Develop and implement AML/CFT

Programme

Carry out Customer Due Diligence (CDD) -including enhanced

due diligence

Report STRs and CTRs to FMU (if

required under AML Act)

Mantain all record of business relationship with client (including

CDD)

Submit annual return to the Institute

The AML Framework


SECTION I RISK ASSESSMENT AND AML/CFT PROGRAMME 1. The Reporting Firm shall develop and implement internal policies, procedures and controls to assess,

manage and mitigate money laundering (“ML”) and terrorist financing (“TF”) risks.

2. For assessing, managing and mitigating the money laundering and terrorist financing risks, the policies, procedures and controls shall include the following:

(a) Risk assessment and management;

(b) Compliance management;

(c) Employee hiring and ongoing training;

(d) Customer due diligence;

(e) Records keeping; and

(f) Reporting. 3. The risk-based approach is an effective way to combat ML and TF. The Reporting Firm shall apply

risk-based approach to identify, assess, manage and mitigate their ML and TF risks.

4. By adopting the risk-based approach, the Reporting Firms shall be able to ensure that measures to prevent or mitigate ML and TF are commensurate with the risks identified. The Reporting Firm need to take into account the latest National Risk Assessment, for developing and updating its risk assessment and AML/CFT Programme.

5. The Reporting Firm shall identify and assess ML and TF risks in relation to:

(a) Its customer (i.e. clients);

(b) Jurisdictions or countries clients are from or in;

(c) The jurisdictions or countries the Reporting Firm has operations or dealings in; and

(d) The products, services, transactions and delivery channels of the Reporting Firm.

6. The nature and extent of any assessment of ML/TF risks shall take into account the type of business, nature of clients and size of operations of the Reporting Firm.

7. The type and extent of the Reporting Firm’s policies, procedures and controls in each of the areas

described in paragraph (2), above, shall be appropriate having regard to the risk of ML/TF and the size and nature of the business. Some of the factors to be considered include:

(a) The nature, scale and complexity of the Reporting Firm’s business;

(b) The diversity of a Reporting Firm’s operations, including geographical diversity;

(c) The Reporting Firm’s clients, products and activity profile;

(d) The volume and size of the transactions;

(e) The degree of risk associated with each area of the Reporting Firm’s operations; and

(f) The extent to which the Reporting Firm is dealing directly with the client or is dealing through intermediaries, third parties, correspondents, or non-face to face access.

8. The Reporting Firm shall also:

(a) Monitor the implementation of those policies, controls and procedures;

(b) Regularly review the risk assessment, policies, controls and procedures and revise them, where necessary; and

The AML Framework


(c) Ensure that its risk assessment, policies, controls and procedures are approved by senior management.

9. The policies and procedures shall include adequate screening procedures to ensure high standards when hiring employees.

10. The Reporting Firm shall communicate the internal policies, procedures and controls established to

address the ML and TF concerns to its partners and employees (i.e. the professional staff).

11. The Reporting Firm shall maintain a record in writing of:

(a) The approved risk assessment, policies, controls and procedures;

(b) Any changes to those policies, controls and procedures made as a result of the Institute’s

supervisory AML/CFT review; and

(c) The steps taken to communicate those policies, controls and procedures, or any changes to them, to the professional staff.

12. The Reporting Firm shall establish and implement an on-going training program for relevant staff. It shall also be ensured that all levels of professional staff have undergone such training and a written record is maintained.

13. Refresher training should be held at least once every two (2) years, or more regularly where there have

been significant developments such as new regulatory requirements or changes to key internal processes.

14. The Reporting Firm having regard to the risk of ML and TF and the size of its business should:

(a) Develop appropriate compliance management arrangements to monitor Reporting Firm’s

compliance with its AML/CFT policy and procedures. This includes the appointment of a compliance officer at the management level.

(b) Establish a function that regularly assesses the effectiveness of the Reporting Firm’s internal policies, procedures and controls, and its compliance with AML/CFT requirements.

15. The Reporting Firm in relation to the specified services shall:

(a) Identify and assess the ML and TF risks that may arise in relation to the development of new

services, business practices including delivery mechanisms and the use of new or developing technologies for both new and existing services and practices; and

(b) Formulate policies, procedures and controls taking into consideration ML and TF threats that may arise from the new business practices or use of new or developing technologies, especially those having features of anonymity.

16. The senior management of the Reporting Firm shall be responsible for the effective implementation of

the firm’s policies, procedures and controls established for the risk assessment, management and mitigation of money laundering and terrorist financing risks. “Senior management" includes:

(a) A sole proprietor of the Reporting Firm;

(b) Individual holding the position of chief executive officer/ managing partner, chief operating officer in a Reporting Firm;

(c) Individual holding the position of AML/CFT compliance officer in a Reporting Firm;

(d) A partner or employee of the Reporting Firm with sufficient knowledge of the Reporting Firm’s money laundering and terrorist financing risk exposure, and of sufficient authority, to take decisions affecting its risk.

The AML Framework


SECTION II CUSTOMER DUE DILIGENCE

17. The Reporting Firm shall apply customer due diligence measures when it:

(a) Establishes a business relationship (The customer due diligence measures shall be applied to all new clients);

(b) Notices a significant change in the nature of business relationship or the ownership and control structure of the client’s business;

(c) Suspects money laundering or terrorist financing; or

(d) Doubts the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification.

18. The Reporting Firm shall verify the identity of the client and beneficial owner (whether permanent or occasional, and whether natural or legal person or legal arrangements) before or during the course of establishing a business relationship. The Reporting Firm can complete verification after the establishment of the business relationship, provided that:

(a) The ML/TF risks are effectively managed;

(b) It is essential to not interrupt the normal conduct of business; and

(c) The verification procedures are completed as soon as reasonably practicable.

19. The following customer due diligence measures shall be performed:

(a) Identifying the client;

(b) Identifying the beneficial owner;

(c) Verifying the client’s and beneficial owner’s identity using reliable and independent source documents, data or information, and taking reasonable measures, such that the firm is satisfied that it knows who the beneficial owner is. For legal persons and arrangements, this shall include firms understanding of the ownership and control structure of the client;

(d) Understanding and as appropriate, obtaining information on the purpose and intended nature of the business relationship; and

(e) Conducting ongoing due diligence on any continuing business relationship and scrutiny of transactions (if any) undertaken throughout the course of that relationship to ensure that the services provided under the business relationship are consistent with the Reporting Firm’s knowledge of the client, their business and risk profile, including, where necessary, the source of funds.

20. The Reporting Firm shall also identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons using the relevant information or data obtained from reliable, independent sources. The Reporting Firm shall:

(a) For legal persons:

(i) Identify the natural persons (whether acting alone or together) who ultimately own the legal person;

(ii) To the extent that there is doubt under (i) as to whether the natural persons who ultimately own the legal person are the beneficial owners or where no natural persons ultimately own

The AML Framework


the legal person, identify the natural persons (if any) who ultimately control the legal person or have ultimate effective control of the legal person; and

(iii) Where there is doubt under (ii) as to whether the natural person(s) who ultimately own or have controlling ownership interest in the legal person are the beneficial owners or where no natural persons ultimately own or exert control through ownership interest in the legal person, identify the natural persons (if any) who ultimately control the legal person or have ultimate effective control of the legal person; and

(iv) Where no natural persons are identified under clause (ii) or (iii), identify the natural persons having executive authority in the legal person, or in equivalent or similar positions.

(b) For legal arrangements:

(i) Trusts – identify the settlors, the trustees, the protector (if any), the beneficiaries (including every beneficiary that falls within a designated characteristic or class), and any natural person exercising ultimate ownership, ultimate control or ultimate effective control over the trust (including through a chain of control or ownership).

(ii) Other types of legal arrangements – identify persons in equivalent or similar positions, as those described under (i) above.

21. The Reporting Firm shall:

(a) Verify the identity of person purporting to act on behalf of a client; and

(b) Obtain and verify evidence to determine authority of such person to act on behalf of the client. Such evidence shall include documentary evidence that the client has appointed the person to act on its behalf and the specimen signature of the person appointed.

22. The Reporting Firm shall verify identification document about a client and beneficial owner from

relevant authorities and bodies (including, various online registers available for the identification and verification of entities). Further, where necessary Reporting Firm shall use other reliable independent sources for verification of client and beneficial owner.

The Reporting Firm shall retain copies of all reference documents used for identification and verification.

23. The documentary record of all reference source documents, data or information used to verify the identity of the client or the beneficial owner shall be retained. Where the client is unable to produce original documents, the Reporting Firm may consider accepting documents that are certified to be true copies by an independent and qualified person (such as a network firm, a notary public, or an external law firm).

24. The Reporting Firm shall also obtain information and examine, as far as possible the background and purpose of all complex and unusual transactions, which have no apparent economic or visible lawful purpose and the background and purpose of these transactions shall be inquired and findings shall be documented with a view of making this information available to the relevant competent authorities when required.

25. The Reporting Firm shall not establish or maintain business relationship through/under anonymous contact details or fictitious names.

26. The Reporting Firm shall not establish a business relationship with following entities and/or individuals:

(a) Persons designated under UN Security Council Resolutions.

(b) Persons proscribed under the Anti-Terrorism Act, 1997 (XXVII of 1997).

(c) Persons acting on behalf of or at the direction of, above (a) and (b).

The AML Framework


The criteria for designation has been specified in various UN Security Council (UNSC) Resolutions including among others (i) Security Council resolutions 1267 (1999), 1989 (2011) and their successor resolutions; and (ii) Security Council Resolution 1373 (2001). The implementation of the UN Security Council Resolutions is an international legal obligation for all Member States of the United Nations. The UN Security Council Resolutions relating to its sanctions regime are implemented in Pakistan through the United Nations (Security Council) Act, 1948 (Act No. XIV of 1948). Under this Act, the Ministry of Foreign Affairs issues Statutory Regulatory Orders (S.R.Os) to give legal effect in Pakistan to the decisions of the UN Security Council. The Ministry of Interior / National Counter Terrorism Authority issues notifications of proscribed individuals /entities pursuant to the Anti-Terrorism Act, 1997.

27. The Reporting Firm shall scan/screen its clients, natural persons appointed to act on behalf of the client and beneficial owners of the client for any matches with the stated designated/proscribed person in the S.R.Os/notifications issued by the Ministry of Foreign Affairs, National Counter Terrorism Authority and Ministry of Interior, from time to time. The Reporting Firm for scanning purposes may use software scanning tool(s) or utilize the information available on websites of UN, Ministry of Foreign Affairs, National Counter Terrorism Authority and Ministry of Interior. In terms of 26 (c) the Reporting Firm for identification of persons acting on behalf of or at the direction of designated / proscribed persons shall use the publicly available information.

28. The Reporting Firm, if during the screening or monitoring of clients finds a true match (i.e. the individual/entity is a designated/proscribed person) or suspects of a designated/proscribed person, shall immediately:

(a) Freeze without delay the client’s fund or block the transaction (if it is an existing client);

(b) Reject the client, if the relationship has not commenced;

(c) Lodge a STR with the FMU;

(d) Notify the Ministry of Foreign Affairs, in case that person is designated under United Nations Security Council Resolutions;

(e) Notify the National Counter Terrorism Authority, in case that person is designated under the Anti-Terrorism Act, 1997; and

(f) Report to AML/CFT Supervisor/Regulator in case assets are frozen or action is taken in compliance with the relevant UNSCRs prohibition requirements, including attempted transactions.

29. The Reporting Firm shall, in addition to continuous screening required under paragraph (28), apply the

customer due diligence measures to existing clients on the basis of risk assessment. The due diligence on existing relationships shall be performed at appropriate times, taking into account whether and when customer due diligence measures have previously been undertaken and the adequacy of data obtained.

30. The application of customer due diligence measures does not imply that Reporting Firm has to repeatedly identify and verify the identity of each client every time the client, with an existing business relationship, enters into a new engagement with the Reporting Firm.

31. The Reporting Firm can rely on the identification and verification steps that it has already undertaken, unless it has doubts about the veracity of that information. Examples of situations that might lead to doubts could be where there is a suspicion of money laundering or terrorist financing in relation to that client, or where there is a material change in the client’s activities, which is not consistent with the client’s business profile.

32. If the Reporting Firm is not able to satisfactorily complete required customer due diligence measures, the Reporting Firm shall: (a) Not establish new business relationship;

(b) Terminate existing business relationship;

The AML Framework


(c) Consider the evidence and circumstances to evaluate as to whether it warrants the filing of an STR; and

(d) Maintain a list of all such clients where the business relationship was refused or needed to be closed on account of incomplete/negative verification.

33. Where Reporting Firm during performance of customer due diligence measures suspects money laundering or terrorist financing, and it reasonably believes that performing the customer due diligence process will tip-off the client, the Reporting Firm shall: (a) Not pursue the customer due diligence process; and

(b) Shall file a STR in accordance with the applicable law.

34. The Reporting Firm is allowed to apply simplified customer due diligence measures, where low risk of money laundering and terrorist financing has been assessed.

35. The examples of possible simplified customer due diligence measures are:

(a) Verifying the identity of the client and beneficial owner after the establishment of the business relationship;

(b) Reducing the frequency of client identification updates;

(c) Reducing the degree of on-going monitoring and scrutinizing transactions, based on a reasonable monetary threshold; and

(d) Not collecting specific information or not carrying out specific measures to understand the purpose and intended nature of the business relationship, but inferring the purpose and nature from the type of transaction or business relationship established.

36. Where simplified customer due diligence measures are performed, the details of the risk assessment and the nature of such measures shall be documented.

37. The simplified due diligence measures are not acceptable:

(a) Whenever there is a suspicion of money laundering or terrorist financing; or

(b) Where specific higher-risk scenarios apply. 38. The Reporting Firm may rely on a third party to conduct customer due diligence on its behalf.

39. In a third party reliance scenario, the third party will usually have an existing business relationship with

the client, which is independent from the relationship to be formed between the Reporting Firm and the client. For example, where a third party introduced a new client to the Reporting Firm resulting in direct business relations between the Reporting Firm and the new client. Thus, if the third party has already performed its own customer due diligence on the new client, the Reporting Firm can then dispense with performing customer due diligence on the new client if the criteria in paragraph (41), below, are satisfied.

40. This is contrasted with an outsourcing or agency scenario, in which the outsourced entity applies the

customer due diligence measures on behalf of the Reporting Firm, in accordance with its procedures, and is subject to the Reporting Firm’s control of the effective implementation of those procedures by the outsourced entity. The reliance on third parties is not intended to cover such outsourcing scenarios.

41. The Reporting Firm’s reliance on third party shall be subject to the following:

(a) The Reporting Firm shall obtain immediately, the necessary information relating to identification of the client, identification of the beneficial owner and/or the nature of business of the client;

(b) Take steps to satisfy itself that copies of identification data and other relevant documentation relating to customer due diligence requirements will be made available by the third party upon request without delay;

The AML Framework


(c) Satisfy itself that the third party is regulated, supervised or monitored for, and has measures in place for compliance with, customer due diligence and record-keeping requirements in line with this Framework; and

(d) Maintain data/ information confidentiality and non-disclosure agreement with the third party. 42. When a Reporting Firm relies on a third party that is part of the same group or a network, the Reporting

Firm may be considered to have applied measures in paragraph 41(b) and 41(c) through its group or network programme and that paragraph 41(d) is not a necessary precondition to reliance when higher country risk is adequately mitigated by the Reporting Firm’s or network’s AML/CFT policies if:

(a) That group or network applies customer due diligence and record-keeping requirements, as well

as programmes against money laundering and terrorist financing, in line with standards set by the FATF; and

(b) The effective implementation of those customer due diligence and record-keeping requirements and AML/CFT programmes is supervised at a group or network level by a competent authority.

43. When determining in which countries the third party that meets the conditions can be based, Reporting

Firm should have regard to information available on the level of country risk.

44. The Reporting Firm shall have the ultimate responsibility for customer due diligence measures and ongoing monitoring of its clients, notwithstanding the reliance upon a third party.

The AML Framework


SECTION III ENHANCED CUSTOMER DUE DILIGENCE

45. The Reporting Firm shall apply enhanced customer due diligence and monitoring measures in the circumstances where the risk of ML/TF is higher.

46. The Reporting Firm shall apply enhanced customer due diligence, proportionate to the risks of business

relationships and transactions with natural and legal persons, countries/geographies, channels, typologies identified as high risk by FATF, National Risk Assessment, AML & CFT Supervisor and its own risk assessment.

In particular, the Reporting Firm shall increase the degree and nature of monitoring of the business relationship. Possible circumstances where the risk of ML/TF is higher, include:

(a) The client or potential client is a politically exposed person (“PEP”), or a family member or known

close associate of a PEP;

(b) The client or potential client is a Non-Government Organization (NGO), Not for Profit Organisation (NPO) or charity;

(c) Business relationship or transaction established with an individual/entity in a high-risk third country;

(d) Customer risk factors:

(i) The business relationship is conducted in unusual circumstances (e.g. significant unexplained geographic distance between the Reporting Firm and the client), Non-resident clients.

(ii) Legal persons or arrangements that are personal asset-holding vehicles.

(iii) Business that are cash-intensive.

(iv) The ownership structure of the entity appears unusual or excessively complex given the nature of the entity’s business.

(e) Country or geographic risk factors:

(i) Countries identified by credible sources, such as mutual evaluation or detailed assessment reports or published follow-up reports, as not having adequate AML/CFT systems.

(ii) Countries subject to sanctions, embargos or similar measures issued by, for example, the United Nations.

(iii) Countries identified by credible sources as having significant levels of corruption or other criminal activity.

(iv) Countries or geographic areas identified by credible sources as providing funding or support for terrorist activities, or that have designated terrorist organizations operating within their country.

(f) Product, service, transaction or delivery channel risk factors:

(i) Anonymous transactions (which may include cash).

(ii) Non-face-to-face business relationships or transactions.

(iii) Payment received from unknown or un-associated third parties.

(g) When client receives donations and is a body corporate, partnership, association or any other legal arrangement including non-governmental organizations and not for profit organizations;

The AML Framework


(h) When the Reporting Firm discovers that a client has provided false identification documentation or information and the Reporting Firm proposes to continue to deal with that client;

(i) A complex and unusually large transaction, or there is an unusual pattern of transactions, and such transaction or transactions have no apparent economic or legal purpose, and

(j) Other case which by its nature can present a higher risk of money laundering or terrorist financing.

47. Examples of enhanced customer due diligence measures that could be applied for higher risk business relationships include: (a) Obtaining additional information on the client (e.g. occupation, volume of assets, information

available through public databases, internet, etc.), and updating more regularly the identification data of client and beneficial owner.

(b) Obtaining additional information on the intended nature of the business relationship.

(c) Obtaining information on the source of funds or source of wealth of the client.

(d) Obtaining information on the reasons for intended or performed transactions.

(e) Obtaining the approval of senior management to commence or continue the business relationship

(f) Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

(g) Requiring the first payment to be carried out through an account in the client’s name with a bank subject to similar customer due diligence standards.

48. The Reporting Firm shall have senior management approval for establishing or continuing such

business relationships with clients for which enhanced customer due diligence measures are performed.

49. The Reporting Firm shall perform enhanced customer due diligence for the client and beneficial owners

who are PEPs.

50. For the identification of a PEP, the Reporting Firm shall have appropriate risk management systems to determine whether a client or the beneficial owner of a client is a:

(a) Foreign PEP;

(b) Domestic PEP;

(c) International organisation PEP; or

(d) Family member or a known close associate of a PEP. 51. The enhanced customer due diligence requirements for a PEP shall also apply to the family members

and close associates of foreign and domestic PEPs. For the purpose of deciding whether a person is a known close associate of a PEP, the Reporting Firm need only have regard to information which is in its possession, or to credible information which is publicly available. “Family member of a politically exposed person” includes Spouse(s) and children of the PEP, the

spouses of the PEP’s children; and Parents of the PEP;

“Known close associate of a PEP” means:

(a) An individual known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relations with a PEP;

(b) An individual who has sole beneficial ownership of a legal entity or a legal arrangement which is known to have been set up for the benefit of a PEP.

The AML Framework


52. Existing clients of the Reporting Firm may become PEPs after entering into a business relationship with the Reporting Firm. Therefore, the Reporting Firm considering the level of risk shall periodically monitor its existing client base for a change in PEP status.

53. The Reporting Firm shall ensure that enhanced customer due diligence is performed where there is any business relationship or transaction with a client established in a jurisdiction for which this is called for by FATF.

54. In addition to the jurisdictions called for by FATF in paragraph (53) above, the Federal Government or Institute on the advice of the Federal Government, regarding weakness in the AML/CFT systems of other countries, shall direct the Reporting Firms to adopt enhanced customer due diligence in case of clients belonging to such countries. The FMU and SECP may also communicate to the Institute about jurisdictions requiring the enhanced customer due diligence by the Reporting Firms.

55. The Reporting Firm shall conduct enhanced due diligence of clients that are non-governmental organizations (NGOs), non-profit organizations (NPOs) and charities. The Reporting Firm shall also:

(a) Ensure that the business relationship may not be used for unlawful objects;

(b) Issue the instruments in the name of the relevant NGO, NPO or charity, as given in its constituent documents;

(c) Conduct enhanced due diligence of the authorized agents or representatives as well as members of the governing body of the Trust, NGO, NPO or charity.

(d) Ensure that the authorized agents or representatives as well as members of the governing body of any Trust, NGO, NPO or charity having existing relationship are not affiliated with any proscribed or designated individual or entity, whether under the same name or a different name. In case of any positive match, the Reporting Firm should consider actions required under paragraph (28).

The AML Framework


SECTION IV RECORD KEEPING

56. The Reporting Firm shall maintain all necessary records relating to the customer due diligence/enhanced customer due diligence (about the client and beneficial ownership) business relationships/transactions (domestic and international) for a minimum period of five years of the end of client relationship or end of the date of transaction, whichever is later, or a longer period if specified in the AML legislation or where transactions, clients or instruments are involved in litigation or the same is required by a Court of law or other competent authority.

57. The Reporting Firm shall also keep and maintain all record related to STRs and CTRs filed by it for a period of at least ten years after such reporting, in accordance with the AML legislation.

58. The records shall be sufficient to permit reconstruction of individual engagements/transactions including the nature and duration of the business relationship, nature and date of the engagement and transaction, the type and amount of currency involved and the type and identifying number of any account involved in the transactions so as to provide, when necessary, evidence for prosecution of criminal activity and such records may be maintained in paper or electronic form, provided it is admissible as evidence in a court of law.

59. The Reporting Firm shall ensure, to make available on a timely basis, all risk assessment, customer due diligence and engagement records to the Institute, FMU and law enforcement agencies, whenever required.

The AML Framework


SECTION V INSTITUTE’S AML SELF-REGULATORY SYSTEM

60. The Council shall establish an AML Supervisory Board, which shall be supported by the AML Supervision Department

61. The AML Supervisory Board shall be responsible for supervising, regulating, implementing and enforcing the AML Framework and performing such other functions as are necessary for this purpose and may be delegated to it by the Council. The AML Supervisory Board shall ensure compliance by members in practice with the provisions and obligations specified by the AML Act and the regulations issued there under on a risk-based approach having a clear understanding of the ML and TF risks: (a) present in the country; and (b) associated with the type of their clients, products and services.

62. The AML Supervisory Board may delegate any of the functions assigned to it to the AML Supervision Department and its officers.

63. The composition, tenure, duties and other related matters of the AML Supervisory Board are provided in Appendix A to this Framework.

64. The AML Supervisory Board in addition to its functions under this Framework, shall submit to the Council an annual report within four (4) months after June 30 of each year, covering its duties under this Framework (Duties of AML Supervisory Board are mentioned in Appendix A).

AML Review and Validation System

65. The AML Supervisory Board shall establish an ‘AML Review and Validation System’. Under this system:

(a) All Practicing Firms shall on an annual basis submit ‘Form A’ of Annual Return, by July 31; and (b) All Reporting Firms shall on an annual basis submit ‘Form B’ of Annual Return, by August 15.

All Firms, in addition to the above Forms of Annual Return, shall supply, in accordance with the terms and return dates specified, any additional information and/or documentation requested by AML Supervisory Board/AML Supervision Department in exercising its functions and responsibilities under the AML Framework.

66. In cases where a Firm fails to comply with paragraph (65), one or more of the following actions may be taken by the AML Supervisory Board:

(a) Require the submission of relevant Form or other information within the specified time;

(b) Require the partner(s) and/or employees to undergo AML training or CPD activities;

(c) Refer senior management (who is a member of the Institute) of the Firm, as the case may be, to the Secretary of the Institute for the facts to be laid before the Investigation Committee, if:

i. Such Firm fails to act on (a) or (b) above; or

ii. Material misrepresentation is made by such Firm relating to scope and requirements under this Framework.

(d) Subject to independent legal advice, may refer a Firm’s or a Member’s material or willful non-compliance with this Framework or the AML/CFT legislation to the AML Supervisor or other government agency under the AML/CFT legislation or make a disclosure as required under law. Such reference or disclosure are not to be taken to breach any restriction, however imposed, on the disclosure of information.

The AML Framework


67. A member found to be guilty of professional misconduct due to failure in complying with this Framework shall be sanctioned in accordance with the Chartered Accountants Ordinance, 1961. Such penalty shall be in addition to any penalty provided under the AML and CFT legislation.

68. The Institute, its Council, AML Supervisory Board members, Investigation Committee members and all employees of the Institute shall keep confidential all material and information provided by the Reporting Firm and Practicing Firm in connection with the AML review and validation, whether oral or in writing, except that such material or information may be disclosed (directly or indirectly) to any person or body undertaking regulatory or law enforcement responsibilities, for the purpose of assisting that person or body in exercising their functions or responsibilities or where such disclosure is required by law. Annual review of Reporting Firm

69. In order to validate the annual returns and information submitted under paragraph (65), AML Supervisory Board through AML Supervision Department shall perform an annual review of the Reporting Firms by adopting a risk-based approach. The AML Supervisory Board shall, however, has discretion to review either all or a selected number of Reporting Firms.

The AML Supervisory Board shall also direct the AML Supervision Department to conduct a review of any Firm, whether it is a Reporting Firm or a Practicing Firm, on receipt of a complaint from a government agency.

70. The AML Supervisory Board may also direct the AML Supervision Department to conduct a review of any Firm, whether it is a Reporting Firm or a Practicing Firm, on receipt of a complaint from any other person. The AML Supervisory Board shall have the discretion to either first seek a response from the Firm against whom a complaint has been received or to immediately direct that a review be conducted.

71. The review of the Reporting Firms will be carried out by the AML Supervision Department in the manner

set out below.

Conduct of the Review

72. The AML Supervision Department shall conduct the review of AML/CFT systems and controls of all or any Reporting Firm, it considers necessary, to:

(a) Check that the AML/CFT risk assessment is up to date;

(b) Check that the AML/CFT controls, policies and procedures are in accordance with the AML Framework;

(c) Identify any deficiencies in the effectiveness of the risk assessment and the AML/CFT systems and controls, and issue a report thereon;

(d) Determine the course of action on the deficiencies noted during AML review; and

(e) Carry out any other task that is necessary for the implementation of this framework. 73. The AML Supervisory Board shall convey to the Reporting Firm not less than thirty (30) days in advance

its intent to carry out an annual review of the Firm.

74. Subject to paragraph (76), below, if, on the receipt of the notice under paragraph (73), the Reporting Firm is of the opinion that it will not be convenient to carry out annual review on the review date, the Reporting Firm shall, not more than ten (10) business days after service of the review notice, inform the AML Supervision Department in writing of 3 further dates (being business days) on which AML Supervision Department can carry out an AML review and validation.

75. The 3 further dates referred to in paragraph (74) above, shall be no later than forty five (45) days of the review date communicated by the Institute, and the Reporting Firm shall comply with all reasonable requests by AML Supervision Department to reschedule the date of the review.

76. Above paragraphs (73), (74) and (75) shall not apply where the AML Supervisory Board is of the opinion that it is in the public interest for an annual review to be conducted with less than thirty (30) days' notice.

The AML Framework


77. The Reporting Firm shall provide appropriate facilities to the AML reviewer(s) to enable them to carry out their functions during an onsite review visit.

78. The Reporting Firm shall use best endeavors to ensure that the senior management of the Reporting Firm is present during the AML review and validation.

79. At the conclusion of the review, any issues or concerns will be notified by the AML Supervision Department in writing to the Reporting Firm. The Reporting Firm shall, within fourteen (14) days of service of such notification (subject to any extension granted), provide a response in writing to the AML Supervision Department, including setting out an action plan to address and rectify such issues or concerns.

80. On the conclusion of review and on basis of any response received from the Reporting Firm, the AML

review reports prepared by the AML Supervision Department shall be presented before AML Supervisory Board for approval, except for urgent cases where, with the permission of the Chairman AML Supervisory Board, a report may be circulated to all members of AML Supervisory Board for review and approval. At least three (3) members of the AML Supervisory Board including the Chairman shall approve the circulated report. Reports approved by circulation shall be ratified in the next meeting of the AML Supervisory Board.

81. After approval by the AML Supervisory Board, the final report as per the format/form established by

the AML Supervisory Board including deficiencies if any shall be issued to the Reporting Firm.

82. If the AML Supervisory Board is not satisfied with the response received from the Reporting Firm under paragraph (81) above, it may take one or more of the following actions:

(a) Conduct a further review of the Reporting Firm;

(b) Require the partner(s) and/or employees to undergo additional AML training or Continuing Professional Development (CPD) activities as recommended by the AML Supervisory Board;

(c) Arrange a fresh review of the Reporting Firm after the period of 90 days (subject to any extension granted by the AML Supervisory Board);

(d) Subject to independent legal advice, may refer a Firm’s or a Member’s material or willful non-compliance with this Framework or the AML/CFT legislation to the AML Supervisor or other government agency under the AML/CFT legislation or make a disclosure as required under law. Such reference or disclosure are not to be taken to breach any restriction, however imposed, on the disclosure of information.

(e) May refer:

I. Partner(s) responsible for client’s business relationship/transaction and is considered non-compliant with AML/CFT requirements under this Framework; and/or

II. Senior management (who is a member of the Institute) of the Reporting Firm

To the Secretary of the Institute for the facts to be laid before the Investigation Committee, if:

(i) The Reporting Firm fails to implement the action plan submitted at the time of earlier AML review of the Reporting Firm under paragraph (79) above;

(ii) Significant deficiencies in the design and implementation AML/CFT programme, policies, or procedures are noted during the Reporting Firm’s AML Review; or

(iii) Material misrepresentation is made by the Reporting Firm during the process of the AML review and validation.

The AML Framework


SECTION VI COORDINATION WITH THE AML SUPERVISOR

83. The AML Supervisory Board shall submit to the AML Supervisor of the accountancy sector, designated

by the Federal Government, annually, the report prepared under paragraph (64). The report shall be submitted within one (1) month of its submission to the Council. The AML Supervisory Board shall also provide the information reasonably required by the AML Supervisor in connection with the annual report, in accordance with the applicable law.

84. The AML Supervisory Board shall coordinate with the AML Supervisor, with regard to the Institute’s

Self-Regulatory AML System, in accordance with the applicable law. In addition to the annual report to be submitted by AML Supervisory Board, the AML Supervisor may request for additional information from the AML Supervisory Board, if needed.

85. For the sake of clarity, the AML Supervisor will not directly be involved in the supervision of the

Members of the Institute. It will be the AML Supervisory Board that shall provide information and take any such action that the AML Supervisor requires and the AML Supervisory Board deems appropriate. These actions include:

(a) Request for information from the Members of the Institute;

(b) Interview or access to the Members of the Institute; and

(c) Any function of the Institute un-related to AML supervision carried out by the Council under the Chartered Accountants Ordinance, 1961.

Appendix A


AML Supervisory Board (Please refer to paragraph (64) of the Framework) Composition (1) The AML Supervisory Board shall comprise of five (5) members, nominated as follows:

(a) One member shall be nominated by the SECP; (b) One member shall be nominated by the FMU; and (c) Three members shall be nominated by the Council.

(2) The Chairman of AML Supervisory Board shall be nominated by the Council.

(3) The Council nominations would be subject to the condition that maximum two such nominations

could be of the Council members. Appointment and Tenure (4) The relevant nominating body shall nominate an individual as member of the AML Supervisory Board

in accordance with this Framework within thirty (30) days of effective date of this Framework.

(5) A member of the AML Supervisory Board shall serve for two (2) years, unless he/she ceases to be a member.

(6) A member may serve up to two terms of two (2) years each. After completion of first term of two (2)

years, an individual would be eligible for re-nomination by the relevant appointing body, for another term of two (2) years.

(7) In case of any casual vacancy the new member shall be nominated by the relevant appointing body

within thirty (30) days, for remaining period of the member who vacated the position.

(8) In computing the number of terms under clause (6), the term served by a member to fill in the casual vacancy shall be disregarded.

Cessation of Membership (9) A member of AML Supervisory Board shall cease to be a member if he:

(a) is replaced by his nominating body; (b) has given his resignation in writing addressed to the Secretary of the Institute and the Council

has accepted the same; (c) becomes of unsound mind; (d) has applied to be adjudicated as an insolvent and his application is pending;

(e) is an undischarged insolvent; (f) has been convicted by a court of law for an offence involving moral turpitude; (g) has displayed lack of fiduciary behavior and a declaration to this effect has been made by a

court;

(h) is removed from the membership of the Institute; or

(i) fails to attend three consecutive meetings of the AML Supervisory Board without leave of absence from the Chair.

Appendix A


Duties of AML Supervisory Board (10) The AML Supervisory Board shall:

(a) Identify, assess and update the risks of ML and TF to which the Institute’s members in practice are subject;

(b) Adopt a risk-based approach to the exercise of supervisory functions under this Framework; (c) Carryout the monitoring and supervision of the Institute’s members in practice under the AML

review and validation system; (d) Set the format and parameters of the AML review report of the Reporting Firms;

(e) Collect such information as it considers necessary for the purpose of AML review and validation

system; (f) Approve the report on the Reporting Firm’s AML review and validation;

(g) Refer the matter of a member to the Investigation committee of the Institute for supervisory

action; (h) Refer the matter of a Firm or a Member of the Institute, to the AML Supervisor, FMU or other

government agency for supervisory action; (i) Keep a record in writing of the significant decisions and actions it has taken in the course of its

supervision, and of its reasons for deciding not to act in a particular case; (j) Have sufficient resources in order to carry out its duties. It shall also ensure that adequate

training is carried out of the relevant staff for performing AML Review and Validation System; (k) Evaluate and assess on a regular basis the performance of the AML Supervision department; (l) Designate a person to liaison with AML Supervisor and other AML related government agencies,

and monitor and manage the Institute’s compliance with its responsibilities as a self-regulatory body under this Framework;

(m) Issue guidance material to facilitate the members on how to meet their AML/CFT legal

obligations; and (n) Perform any other function relating to the Institute’s AML Self-Regulatory Supervisory role under

this Framework, or as directed by the Council. Duties and Powers of the Chairman of AML Supervisory Board (11) The Chairman shall be responsible for the following:

(a) Chair the meetings of AML Supervisory Board; (b) Ensure timely preparation and approval of agenda, working papers, minutes etc. of the meeting; (c) Ensure that a meeting of AML Supervisory Board is planned effectively, conducted according to

this Framework and that matters are dealt with in an orderly and efficient manner; (d) Recommend removal of member(s) to the nominating body in case a member of AML

Supervisory Board is absent for three consecutive meetings of AML Supervisory Board; (e) Refer the matter to the nominating body for filling up of any casual vacancy; (f) Allow any person to attend the meeting of the AML Supervisory Board; and

Appendix A


(g) Any other function as required/prescribed in the framework.

Secretary of AML Supervisory Board

(12) The head of AML Supervision Department, shall act as the secretary of the AML Supervisory Board.

(13) Secretary shall ensure that the AML Supervisory Board receives information and papers in a timely manner to enable full and proper consideration to be given to the related issues.

Quorum

(14) Minimum three (3) members of AML Supervisory Board shall form the ‘Quorum’ for a meeting. Meetings

(15) The AML Supervisory Board shall meet at least twice in a year, and otherwise as required.

(16) Meetings of AML Supervisory Board shall be convened by the secretary of the AML Supervisory Board with the approval of the Chairman.

(17) The Chairman shall set the agenda of the meeting of the board and ensure that reasonable time is available for discussion of the same.

(18) The following persons, may attend a meeting of the AML Supervisory Board:

(a) A member of the AML Supervisory Board; (b) The secretary to the AML Supervisory Board; (c) Any staff of Institute whose role it is to advise or inform the AML Supervisory Board on Institute’s

bye-laws, regulations or the law, or its responsibilities, duties, powers and procedures under the Chartered Accountants Ordinance, 1961 and this Framework; and

(d) Any other person whom the Chairman permits.

(19) In the absence of the Chairman, the members present shall elect amongst themselves a Chairman,

who shall preside over the meeting of AML Supervisory Board.

(20) The meetings of the AML Supervisory Board may be conducted via video conference and other alternative means, depending on the geographical spread of members.

(21) AML Supervisory Board meetings cannot be attended by proxy by any of its members.

(22) The AML Supervisory Board may also communicate between meetings by electronic or non-electronic correspondence. For example, to obtain comment on any urgent matter or to poll initial views on any matter for future discussion.

(23) At least three (3) members of the AML Supervisory Board including the Chairman shall approve the

AML Report of a firm. All other matters before the AML Supervisory Board shall be decided by a majority of votes of the members present in the meeting. In the event of equality of votes, the person presiding shall have a casting vote in addition to his own vote.

Notice of meetings

(24) A notice in writing of each meeting of the AML Supervisory Board, confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the AML Supervisory Board no later than seven business (7) days before the date of the meeting, except in the case of emergency meetings, where the notice period may be reduced or waived. Supporting papers shall be sent to members at the same time.

Appendix A


(25) Notices, agendas and supporting papers may be sent in electronic form. Minutes of meetings

(26) The secretary shall minute the proceedings and decisions of all meetings of the AML Supervisory Board, including recording the names of those present and in attendance.

(27) Draft minutes of AML Supervisory Board after approval by the chairman will be circulated promptly to all members of the AML Supervisory Board.

Retention of record (28) For all the reviews conducted, the AML Supervisory Board shall retain all AML Review reports issued

to the Reporting Firms for a period of ten years from the date of such reviews. Working papers relating to AML review shall be retained at least for a period of ten years from the date of AML report. All other records and documentation relating to the functions performed under this Framework shall be retained for ten years from the date of the related document/record.

In case of any litigation in the court of law, the AML review reports and the working papers relating to AML Review of the concerned Reporting Firm or member shall be retained until the conclusion of the litigation.

........................

Appendix B


FORMS

Response

1 Name of the reporting entity: (Mention firm name)

2

3

4

4 Partners of the firm: (Mention number)

5 People working for the firm: (Mention number)

6

7

8

* Please select one

Declaration and signature

Date:

Signature:

Full name:

Position:

Official email address:

NOTE

1.1

1.2

I confirm that I have the authority to submit this form on behalf of the reporting entity (Name of the Firm) . I have reviewed the answersand information and I confirm that I am satisfied that, to the best of my knowledge, after undertaking all reasonable inquiries, allanswers are true and correct.

Physical branch/office location of firm in Pakistan, other than the main office: (Mention the

addresses)

Form A

Annual Return

Details of partner designated to receive AML/CFT related information from external

stakeholders: (Please provide Name, Position, contact details including official telephone number

and email address)

Address of main office of the firm: (Mention firm's postal address and telephone number)

Did the firm provide any of the AML/CFT regulated services (i.e. Accountant and Trust or

Company Service Provider) mentioned in the AML Framework? (Yes / No)*

If your answer to question 7 (above) is "Yes", please indicate the AML/CFT regulated services

performed by the firm: (Accountant / Trust or Company Service Provider / Both)*

Period of Form A of the Annual Return: (Mention the period 'From - to", information in Form Acovers)

(Required to be submitted by all firms)

Subsequently submit Form A annually. Based on the services rendered to clients during the period of last 12 months, i.e. 01 July to 30 June.

Subsequently submit Form A by 31 July each year

Under the AML Framework, Firm shall:

Submit Form A by July 31, 2020 (i.e. First submission)

Submit Form A in accordance with the requirements of the Transitional Provisions of the AML Framework. Based on the services rendered to (i) existing clients as of the effective date of the AML Framework and (ii) new clients during the period from effective date of the AML Framework to June 30, 2020.

Response Explanation

1 Reporting Firm

1.1 Name of the Reporting Firm: (Mention firm name)

1.2 Period of Form B of the Annual Return: (Mention the period 'from - to", information in Form B covers)

1.3 Date of last submitted Form B of Annual Return (if any): (Date)

1.4 Date of Institute's last AML/CFT review of the Reporting Firm: (Date)

1.5

2 AML/CFT Risk Assessment

2.1

2.2

2.3

3 AML/CFT Programme

3.1

- Customer due-diligence and On going Monitoring (Yes/No)*

- Reporting knowledge or suspicion of money laundering (Yes/No)*

- Record-keeping (Yes/No)*

- Risk assessment and management (Yes/No)*

- Employee hiring and ongoing training (Yes/No)*

- Compliance management (Yes/No)*

3.2

3.3

3.4

3.5

3.6

4 Specified services

4.1

4.2

- A person seeking to conduct an occasional transaction or occasional activity through the Reporting Firm? (Yes/No)*

Does the Reporting Firm have procedures to identify and verify the identity of—

- A new client (including the client’s beneficial owners or any person acting on behalf of a client)? (Yes/No)*

Has the Reporting Firm acted as a formation agent of legal persons or arrangements? (Yes / No)*

Has the Reporting Firm designed exception handling procedures for issues related to customer due

diligence? (Yes/No)*

Has the Reporting Firm provided relevant partners and relevant staff with appropriate training of AML /

CFT? (Yes / No)*

- Existing clients, according to the level of risk involved, if there has been a material change in the nature or purpose of the business relationship and Reporting Firm considers that it has insufficient information about the client? (Yes/No)*

If you answered “yes”, please mention how many of the following entities have been formed. (Circle the

estimated number)

When was the most recent internal review of Reporting Firm's AML/CFT programme completed? [Date]

Has the Reporting Firm been asked to provide AML/CFT relating information to FMU/ Government

agencies/ court of law? (Yes / No)*

Has the Reporting Firm carried out a AML/CFT risk assessment? (Yes / No)*

Form B

Annual Return

(Required to be submitted by the Reporting Firms under the AML Framework)

When was the most recent AML/CFT risk assessment completed and documented? (Please mention the

date)

Does the Reporting Firm have written policies and procedures, designed to detect ML/TF, relating to:

Has the Reporting Firm considered the latest National Risk Assessment (NRA) (subject to its availability

by the relevant government authority) while assessing its risks relating to ML and TF? (Yes / No)*

Were significant deficiencies identified by the Reporting Firm during the most recent internal review of

Reporting Firm's AML/CFT programme? (Please mention the deficiencies noted)

Companies 0 1-5 6-15 25+

0 1-5 6-15 25+

0 1-5 6-15 25+

0 1-5 6-15 25+

Other [Please specify] 0 1-5 6-15 25+

4.3

4.4

4.5 If you answered “yes”, please mention the number of:

4.6

4.7

4.8

Companies: 0 1-5 6-15 25+

Trusts (excluding charitable trusts): 0 1-5 6-15 25+

0 1-5 6-15 25+

0 1-5 6-15 25+

Other: [specify]

4.9

4.10

0 1 - 100,000 101,000 - 1,000,000 1,000,000+

4.11

(a) A transfer of beneficial interest in land or other real estate property. (Yes/No)*

4.12

0 1 - 1,000,000 1,000,001 - 3,000,000 3,000,000+

4.13

NGOs (including charitable trusts, societies and other charitable entities)

Partnerships

Has the Reporting Firm rendered the services by arranging for a person to act as a nominee director or

trustee in relation to legal persons or legal arrangements? (Yes/No)*

Nominee directorship roles: [Number]

Trusts (excluding NGOs)

Has the Reporting Firm incorporated companies or formed trusts or other legal structures or

arrangements in jurisdictions outside Pakistan? (Yes/No)*

Did the Reporting Firm introduce any new product, service, technology relating to accountant or trust &

company service provider? (Yes/No)*

If you answered “yes”, please mention how many of the entities (where the firm has any of the above

roles) were formed/established by the Reporting Firm. (Number)

Trustee roles: [Number]

Has the Reporting Firm provided following services by engaging in or giving instructions on behalf of a

client to another person for:

(b) A transaction on behalf of any person in relation to the buying, transferring, or selling of a business or legal person (for example, a company) or any other legal arrangement. (Yes/No)*

(c) A transaction on behalf of a client in relation to creating, operating, and managing a legal person (for example, a company) or any other legal arrangement. (Yes/No)*

Estimate the total value of the transactions listed in 4.11 above (excluding your professional fees). (Circle

the total estimated value)

Partnerships

Number of entities

NGOs (including charitable trusts, societies and other charitable entities)

Has the Reporting Firm managed client funds (other than sums paid as fees for professional services),

accounts, securities, or other assets? (Yes / No)*

If you answered “yes”, estimate the value of funds managed. (Circle the estimated value of funds managed)

(Rupees)

(Rupees)

Has the Reporting Firm provided a registered office or a business address, a correspondence address,

or an administrative address for a company, or a partnership, or any other legal person or arrangement?

(Yes/No)*

If you answered “yes”, please encircle the number of companies, partnerships, or other legal persons or

arrangements that Reporting Firm provides these services to. (Encircle the number)

Number of entities

4.14

4.15

5 Clients

5.1Has the Reporting Firm undertaken customer-due diligence (CDD) of all new clients? (Yes/No)*

5.2

5.3

5.4

• a trust or another vehicle for holding personal assets: [number]

• an overseas government body: [number]

• a Pakistan resident individual: [number]

• a non-resident individual: [number]

5.5

5.6

5.7

5.8

5.9

5.1

5.10 Has the Reporting Firm rejected client(s) due to incomplete / negative CDD? (Number)

5.11

6 Record Keeping

6.1

7 Reporting

7.1

7.2

7.3

8 Supplementary questions

8.1

Has the Reporting Firm carried out screening of existing clients, after issuance of notification/SRO by

the Ministry of Interior/ NACTA or Ministry of Foreign Affairs relating to designated and proscribed

persons. (Yes / No) *

Has the Reporting Firm identified any designated / proscribed person during CDD screening

procedures? (Yes / No) *

Has the Reporting Firm identified any client from the FATF designated 'high-risk' countries? (Yes / No) *

If you answered "yes", please specify the new product, service or technology relating to AML/CFT

regulated services under the AML Framework?

• a non-resident entity (including companies, partnerships, trusts, charities, and incorporated societies):

[number)

Has the Reporting Firm provided AML/CFT regulated services under the AML Framework to other

DNFBPs? (Yes / No)*

When providing AML/CFT regulated services, has the Reporting Firm used intermediaries or agents in

Pakistan or outside Pakistan? (Yes/No)*

• a Pakistan resident entity (including companies, partnerships, trusts, charities, and other incorporated or

unincorporated entities): [number]

Has the Reporting Firm undertaken CDD of existing clients, according to the level of risk involved, if

there has been a material change in the nature or purpose of the business relationship and the Reporting

Firm considers that it has insufficient information about the customer? (Yes/No)*

How many clients the Reporting Firm conducted CDD in the course of carrying out AML/CFT regulated

services under the AML Framework: [Mention the number]

How many of the clients are:

• classified as politically exposed persons (PEP). (Include clients that are beneficially owned or are controlled by,

or for the benefit of, a PEP): [number]

If answer to above is 'yes', please mention the number of times the screenings have been carried out.

(Number)

Did the Reporting Firm file CTR with the FMU? (Mention number of CTRS filed, if any)

Does the Reporting Firm accept cash or bearer cheque (physical currency) as a payment of professional

fee? (Yes/No)*

Did the Reporting Firm file STR with the FMU? (Mention number of STR(s) filed, if any)

Has the Reporting Firm been required to report any matter under the AML or CFT legislations to a

government agency or court of law. (Yes / No)*

If answer to above is 'yes', did the Reporting Firm take action under the AML Framework and AML law

(including immediate reporting to relevant government agencies)? (Yes / No) *

Has the Reporting Firm outsourced any CDD requirements to third parties? (Yes/No)*

Has the Reporting Firm complied with the record keeping requirements of the AML Framework? (Yes / No) *

8.2

8.3

Declaration and signature

Date:

Signature:

Full name:

Position:

NOTE

1.

1.1

1.2 Subsequently submit Form B annually by 15 August. Based on the AML/CFT regulated services provided to clients during the period of last 12 months, i.e. 01 July to 30 June.

Subsequently submit Form B by 15 August each year

Under the AML Framework, the Reporting Firm shall:

Submit Form B by August 15, 2020 (i.e. First submission)

Submit Form B in accordance with the requirements of the Transitional Provisions of the AML Framework. Based on the AML/CFT regulated services that are provided to (i) existing clients as of the effective date of the AML Framework and (ii) new clients during the period from effective date to June 30, 2020.

If you answered “yes”, estimate the total value of transactions: (Mention the estimated total value oftransactions for the past year)

I confirm that I have the authority to submit this form on behalf of the Reporting Firm (name of the firm). I have reviewed theanswers and information and I confirm that I am satisfied that, to the best of my knowledge, after undertaking all reasonableinquiries, all answers are true and correct.

Has the Reporting Firm sent/received funds from other countries (including the payment of fees either

on own behalf or on behalf of someone else)? (Yes/No)*

CAThe Institute of

Chartered Accountantsof Pakistan

PAKISTAN

HEAD OFFICE

Directive 4.25

AUDIT PRACTICE REVIEW & SUPPORT PROGRAM (APRSP)

The Institute of Chartered Accountants of Pakistan being a member of the InternationalFederation of Accountants (IFAC) needs to mandatorily comply with Statements of MembershipObligations (SMOs) issued by IFAC.

IFAC's SMO-1 Quality .Assurance requires that a mandatory quality assurance review system shouldbe in place for firms performing Audit, Assurance and Related Services to ensure that the firmsand its partners comply with all applicable professional standards with particular emphasis onstrengthening the quality of audit assignments. Similar programs for ensuring quality of practiceare followed by institutes globally including those operating in Bangladesh, Sri Lanka, UK andMalaysia.

ICAP already runs a Quality Control Review (QCR) Program under QCR framework since 2003.The QCR framework covers firms that are engaged in statutory external audits of:

• Public Interest Companies;• Large Sized Companies; and• Public Interest and Large Sized Companies which are either associations not for profit or

limited by guarantee.

Now the Institute is introducing 'Audit Practice Review & Support Program' for all the Non-QCR rated firms engaged in Audit, Assurance and Related Services.

The APRS Program approved by the Council, after due process, is attached herewith. It outlines:

(a) Objectives & Scope of the program;(b) Selection of firms for review under the Program and the review process;(c) Details of Appellate Forums and Appeal Process; and(d) Support by the Institute.

The APRS Program is effective from October 1, 2020.

The Program can also be accessed at hltPS://www.icap.org.pk/aprsrli

(331" meeting of the Council- September 4-5, 2020)

Syed Masood AkhtarSecretary

(Established under the Chartered Accountants Ordinance, 1961 - X of 1961)

Chartered Accountants Avenue, Clifton, Karachi-75600 (Pakistan). Ph: (92-21) 111-000-422, Fax: 99251626

Website: www.icap.org.pk. E-mail: [email protected]

AUDIT PRACTICE REVIEW &

SUPPORT PROGRAM

[Not Applicable to QCR Rated Firms]

September 11, 2020

NavaidHussain

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Directive 4.25

NavaidHussain

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NavaidHussain

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AUDIT PRACTICE REVIEW & SUPPORT PROGRAM (APRSP)

TABLE OF CONTENTS

Section Reference

Particulars Page No.

Preamble / Background 3 Part – I Scope, Definitions & Objectives

1.1 Scope 6 1.2 Definitions 6 1.3 Objective of the APRSP 9

Part - II Selection & Arrangement of Reviews

2.1 Firms subject to Practice Review 11 2.2 Selection for Review 11 2.3 Arrangement of Reviews 14

Part - III Directorate of Practice Review

3.1 Establishment of the Directorate of Practice Review (DPR) 16 3.2 Functions & Responsibilities of the DPR 16 3.3 Powers of the Reviewer 17

Part - IV The Review Process & Report

4.1 Review Process 19 4.2 Review Report 20 4.3 Consideration & Determination by the Committee 21

Part - V Retention & Confidentiality

5.1 File Retention 25 5.2 Confidentiality 25

Part - VI Appeal

6.1 Appellate Forum 27 6.2 Filing of Appeal 28

Part - VII Miscellaneous

7.1 Failure to Comply 30 7.2 Amendments / Removal of Difficulties / Effective Date 30

Part - VIII Support by the Institute

8.1 Technical Helpline 32 8.2 Frequently Asked Questions (FAQs) 32

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Preamble/Background

The Institute of Chartered Accountants of Pakistan (the Institute) is a member of the

International Federation of Accountants (IFAC) and Statements of Membership

Obligations (SMOs) by IFAC are issued, which are needed to be mandatorily

complied by its member bodies. The SMO-1 (Quality Assurance) of the IFAC requires

that a mandatory quality assurance review system should be in place for firms

performing audits of financial statements by virtue of which it should be ensured that

the firms and its partners are in compliance with the quality standards for professional

assignments. Similar programs for ensuring quality of practice are followed by

international institutes globally including those operating in Bangladesh, Sri Lanka,

UK and Malaysia.

Building public trust in the work performed by practicing members is one of the key

priorities of the Institute, therefore, improvements in the existing practice regime is

also one of the strategic objectives approved by the Council of the Institute.

Accordingly, the Council of the Institute decided to introduce this ‘Audit Practice Review & Support Program’ to ensure maintenance of quality standards of the

professional practices. This will ensure that the work carried out by practicing

members complies with Professional Standards and is in accordance with the

directives of the Council and other laws, regulations and pronouncements of

professional bodies as applicable in Pakistan.

The ‘Audit Practice Review & Support Program’ provides the application of best

practices followed by professional institutes around the world. The ‘Audit Practice

Review & Support Program’ will run in parallel with the Quality Control Review

(QCR) Program and firms which have attained satisfactory QCR rating under the

QCR program of the Institute are excluded from the ambit of the ‘Audit Practice

Review & Support Program’.’.

The key features of the ‘Audit Practice Review & Support Program’ are as follows:

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(i) Review of engagements to ensure that Audit, Assurance and Related Services

rendered by firms, comply with the Chartered Accountants Ordinance, 1961,

Chartered Accountants Bye-Laws, 1983, Professional Standards, Training

Regulations and Directives of the Council of the Institute;

(ii) Applicable to - firms carrying out Audit, Assurance or Related Services;

(iii) Establishment of a Directorate of Practice Review; and

(iv) Constitution of an Independent Appellate Forum.

The Council believes that the effective implementation of the Program will go a long

way in the development of the profession.

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PART I – SCOPE, DEFINITIONS AND

OBJECTIVES

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1.1. Scope

The ‘Audit Practice Review & Support Program (APRSP, the Program)

applies to all firms providing Audit, Assurance or Related Services conducted

under legal and financial reporting framework as applicable in Pakistan.

This document prescribes the objectives and scope of the Program,

composition, responsibilities and functions of the Directorate of Practice

Review and the Appellate Forum. The Members’ Affairs Committee formed by

the Council shall be responsible for carrying out the implementation of the

Program.

1.2. Definitions In this framework, unless there is anything repugnant in the context:

1.2.1. “Additional Practice Review” means review conducted due to

circumstances provided in paragraph 2.2.6 below;

1.2.2. “Audit, Assurance and related services partner” means a partner

as identified by the Firm to the Institute;

1.2.3. “Audit, Assurance or Related Services” “Audit” means an audit

assignment carried out by a Firm in respect of which the audit report is

issued under International Standards on Auditing as applicable in

Pakistan. “Assurance” means an assurance engagement in respect of

which the assurance report is issued under International Standards on

Assurance Engagement as applicable in Pakistan. “Related services”

refer to assignments performed under the pronouncement of

International Audit and Assurance Standards Board (IAASB) on related

services. These assignments carried out together or separately are

referred to as “Audit, Assurance or Related Services”;

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1.2.4. “Committee” means the ‘Members Affairs Committee’ formed by the

Council of the Institute;

1.2.5. Reviewer” means a Chartered Accountant appointed by the Institute

to carry out Practice Review under this Program and having post-

qualification experience including in a professional QCR rated firm of

Chartered Accountants, as may be prescribed by the Committee. ;

1.2.6. “Chartered Accountant” means a person who is a member of the

Institute;

1.2.7. “QAB” means the Quality Assurance Board;

1.2.8. “Firm” means a sole practitioner or a partnership of the members of

the Institute engaged in providing Audit, Assurance or Related

services;

1.2.9. “Non-Reportable Matters” means matters which are insignificant

departures from the requirements of the Program and are not

considered as Reportable Deficiencies;

1.2.10. “Practice Review” means a review performed under the Program to

ensure that the work carried out by the Firm or Member(s) is in

compliance with professional standards and with the requirements

mentioned in clause 1.3.1 below;

1.2.11. “Director of Practice Review” means a Chartered Accountant

appointed by the Institute under the Program, with post-qualification

experience including in a professional QCR rated firm of Chartered

Accountants as may be prescribed by the Committee, and may include

a Senior Manager of equivalent qualification and prescribed experience

appointed in place of the Director, as deemed appropriate;

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1.2.12. “Re-Review” means re-review conducted as prescribed under

paragraph 4.3.1(c) of this Program on the direction of the Committee

on some or all of the aspects covered in clause 1.3.1;

1.2.13. “Practice Review Year” means a period of twelve months

commencing on 1st July of any year and ending on 30th June of

following year;

1.2.14. “Professional Standards” means the International Standards on

Auditing (ISAs), International Standard on Quality Control 1 (ISQC 1),

Related Services Pronouncements, Ethical Standards, Directives and

Pronouncements issued by the Institute, Legal and Regulatory

Framework and other requirements with respect to Audit, Assurance or

Related Services as applicable in Pakistan;

1.2.15. “Public Practice Program” means a training program prescribed by

the Council and to be completed by a practicing member carrying out

Audit, Assurance or Related Services.

1.2.16. “Reportable Deficiencies” mean matters which are departures from

the requirements of the Program or Professional Standards and are

further categorized as either “significant” (e.g. important to the quality

of the work performed to support the report issued by the practicing

member or important to the usefulness of the financial statements); and

1.2.17. “Partner” means a Chartered Accountant identified as a partner in a

firm of chartered accountants on “Form C” submitted to the Institute.

Any term not defined under this Program shall have the same meaning as

prescribed in the Chartered Accountants Ordinance, 1961 (here-in-after

referred to as ‘the Ordinance’) or the Chartered Accountants Bye-Laws, 1983

(here-in-after referred to as ‘the Bye-Laws’) or any other Directive or

pronouncement of the Institute.

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1.3. Objective of the APRSP

1.3.1 The objective of the Program with respect to a firm is to ensure that:

a) in providing Audit, Assurance or Related Services, a firm complies

with Professional Standards; and

b) it complies with Training Regulations for Firms employing students

as given in Council’s Directive(s);

c) Members are compliant with CPD requirements of the Institute.

1.3.2. In order to achieve the above objectives there shall be periodical

Practice Review of the Firms. The scope of the Practice Review shall

only cover matters noted in 1.3.1 above.

1.3.3. Further, the Program incorporate requirements for members to

complete the Public Practice Program prescribed by the Institute in

order to properly equip and remain updated with knowledge of the

matters related to the public practice concerning Audit, Assurance or

Related Services of the firm.

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PART II - SELECTION AND ARRANGEMENT

OF REVIEWS

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2.1. Firms subject to Practice Review

2.1.1. All firms engaged in providing Audit, Assurance or Related Services

shall be subject to Practice Review under this Program.

2.1.2. Where the name of the firm is appearing in the list of firms having

satisfactory QCR rating, that firm shall be excluded from the purview of

this Program. If the name of the firm is removed from the list of firms

having satisfactory QCR rating, that firm shall be subject to this

Program if it does not apply for review under the QCR Program within

one year from the date of removal from the list of firms having

satisfactory QCR rating.

2.1.3. A firm may apply for an exemption from Practice Review by filing an

Exemption Form in a prescribed format with the Director of Practice

Review certifying that:

a) The firm has not been engaged in Audit, Assurance or Related

Services during the two years preceding the end of last financial

year; or

b) The firm will discontinue the provision of Audit, Assurance or

Related Services within three months from the date of the notice of

Practice Review. However, firms which have provided Audit,

Assurance or Related Services to public limited companies (other

than those which are already covered under the QCR Program)

during the preceding one year from the date of Review shall be

subject to Practice Review, for that period.

2.2. Selection for Review

2.2.1. A member obtaining a practicing license for the first time and

establishing a new firm, either as a sole proprietor or in partnership with

others, in which either the sole proprietor or at least one Partner is

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engaged in providing Audit, Assurance or Related Services, shall be

subject to Practice Review after completing its two years of operation.

2.2.2. A firm, already in practice on the Effective Date of the Program and in

which at least one member is engaged in providing Audit, Assurance

or Related Services shall be subject to Practice Review at any time

after one year of effective date of the Program and thereafter, every

two and a half years from the date of its last Practice Review. However,

the Director of Practice Review may, on special request of the firm,

grant an extension in the Practice Review for a period not exceeding

three months, from the date the Practice Review is due to commence.

2.2.3. Up to fifty percent Members who are engaged in providing Audit,

Assurance or Related Services in a single firm shall be subject to

Practice Review referred to in clause 2.2.2.

Every firm shall ensure that all members engaged in providing Audit,

Assurance or Related Services shall be subjected to Practice Review

at least once within a period of five years. However, any delay on the

Part of Directorate of Practice Review to commence, conduct or

complete the Practice Review during the stipulated time shall be

excluded from this period.

2.2.4. Notwithstanding anything else contained in this Program, a firm can be

subjected to Re-Review in the event, the Committee, through a

resolution passed by at least three fourth majority of its members,

concludes that a firm or a member has not complied with the

requirements specified in paragraph 1.3.1.

2.2.5. Notwithstanding any previous Practice Review, a Firm can be subject

to additional Practice Review, if the Committee so concludes, in the

case of a change in the partnership profile of the Firm. For the purpose

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of this clause, the term “change” means:

(i) Induction of new member(s) by a Firm, which

constitutes 50% or more of the firm’s total partners’

strength.

(ii) Change in the role of existing partner(s) who was/were

not previously providing Audit, Assurance or Related

Services.

The member(s) and or partner(s) referred to in sub

clause (i) and (ii) above will be subject to Practice

Review after completion of one year from the date of

admission, or the change in role, of such member(s) or

partner(s) as the case may be.

(iii) Merger of a firm with another where one of the firms

has not been engaged in the provision of Audit,

Assurance or Related Services and the partner(s) in

such firm has/have not been subject to Practice

Review. Such partner(s) shall be subject to Practice

Review after completion of one year from the date of

merger.

2.2.6 If a case involving a member at the time of commencement of Practice

Review, is pending before the Investigation Committee, the Director of

Practice Review may, with the approval of the Committee, postpone

the Review of the member for the time being to the extent of that

particular assignment/client of the firm in respect of which the

investigation proceedings are in process. The Practice Review may

however, be commenced again with the approval of the Committee.

2.2.7 Notwithstanding anything contained in paragraphs 2.2.1 to 2.2.6 above,

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the Director of Practice Review, in consultation with the Chairman of

the Committee, may decide to defer the Practice Review if the

circumstances so require. However, in such cases Director of Practice

Review shall report the reasons for the consideration and approval of

the Committee in its next meeting.

2.3. Arrangement of Reviews

2.3.1. The Director of Practice Review shall serve a notice to a Firm indicating

that Practice Review of the firm is due.

2.3.2. The firm shall complete and file a Planning Questionnaire, in a format

prescribed by the Committee, with the Director of Practice Review

within 30 days of the notice issued under paragraph 2.3.1.

2.3.3. The Director of Practice Review shall consider the information

contained in the Planning Questionnaire submitted by the firm and

assign one or more Reviewer(s) to conduct the review.

2.3.4. The Director of Practice Review shall give notice in writing in a form to

be prescribed by the Committee giving the name(s) of the assigned

Reviewer(s) and the commencement date of a firm’s review.

2.3.5. The notice shall be served upon the firm at least 30 days prior to the

commencement date or such shorter period as may be mutually agreed

by the firm and the Director of Practice Review.

2.3.6. Within 15 days of receipt of the notice pursuant to section 2.3.4, the firm may file an objection in writing to the named Reviewer(s) for any other valid reason.

2.3.7. The Director of Practice Review, in consultation with the Chairman of

the Committee, shall consider the objection and may assign another Reviewer(s) on being satisfied that there is a reasonable basis for the objection.

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PART III - DIRECTORATE OF PRACTICE

REVIEW

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3.1. Establishment of the Directorate of Practice Review (DPR)

There shall be a DPR in the Institute for carrying out the activities and

functions under the Program. The DPR shall be headed by a Director

or Senior Manager, Practice Review appointed by the Council as it may

deem appropriate. There will be other staff and reviewers appointed by

the Committee. The reviewers shall be appointed as full time practice

reviewers.

3.2. Functions and responsibilities of the DPR

3.2.1. The Director of Practice Review shall have the following functions and

responsibilities:

a) to ensure adequate and effective implementation of Practice

Review in accordance with this Program;

b) to ensure conduct of Practice Review is in accordance with the

procedure laid down;

c) to seek guidance of the Committee in respect of matters where

the Director of Practice Review feels that explicit guidance is

not available in the Program. The Committee shall decide on

the matter expeditiously within a period not exceeding 60 days

of the receipt of such matter or enquiry. Any matter not

specifically covered under this Program shall be referred to the

Council for advice;

d) to finalize the Practice Review report in consultation with the

Reviewer(s) for submission to the Committee;

e) to work as secretary of the Committee;

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f) to maintain record of all reviews, by name of the firm, partner, location, period covered, date of review etc.

g) to represent the Directorate at the Appellate Forum;

h) to maintain an updated list of members and firms subjected to

practice review, conclusions and actions taken; and

i) to appoint, with the approval of the Secretary, any individual

on a fee and authorize him/her to perform Practice Review

under this Program.

3.2.2. The Director of Practice Review shall report functionally to the

Committee through its Chairman and administratively to the Secretary.

3.3. Powers of the Reviewer

3.3.1. A Reviewer shall have the following powers:

a) to review files, record and other information of a firm under

review;

b) to require the firm to provide information and produce

documents necessary for the purposes of Practice Review;

c) to report the findings of the Practice Review at its conclusion to

the Committee through Director of Practice Review;

d) to assist Director of Practice Review in presenting the “Report of

Review” to the Committee; and

e) to assist Director of Practice Review to make representations

before the Appellate Forum, if required.

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PART IV -THE REVIEW PROCESS AND

REPORT

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4.1. Review Process

4.1.1. The Practice Review shall be conducted in accordance with the

procedure laid down in this Program.

4.1.2. On the commencement date of the Practice Review, the Reviewer shall

attend at the office of the Firm, or any other location as may be agreed

with the firm. In conducting the Practice Review, the Reviewer shall

consider:

a) documentation and implementation of the quality control system of

the Firm;

b) current engagement files (covering Audit, Assurance or Related

Services) of last completed assignments provided that, in case of

private limited companies, selection preference would be given to

engagement files of companies having share capital exceeding

Rupees fifty million or annual turnover exceeding Rupees one

hundred million;

c) compliance with Professional Standards;

d) compliance with the provisions of the Ordinance, Byelaws and

Directives of the Institute;

e) compliance with training regulations of the Institute;

f) compliance with laws and regulations as applicable in Pakistan,

related to Audit, Assurance and Related services;

g) that the practicing members carrying out Audit, Assurance or

Related services of the firm have attended the Public Practice

Program once in three years; and

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h) Compliance with CPD program/directive of the Institute.

4.1.3. The Reviewer shall select two engagement files to be reviewed for each

partner or sole proprietor engaged in audit, assurance and related

services of the firm. However, the Reviewer may, if deemed necessary,

select additional files to be reviewed with reasons to be recorded in

writing duly concurred by Director of Practice Review. The Reviewer

shall consider the following factors regarding selection of files:

a) the degree of reliance, if any, to be placed on quality controls;

b) the size of the firm ; and

c) level of risk involved in the engagement.

4.1.4. The Reviewer shall use a Practice Review checklist duly approved by

the Committee to ensure that requirements of the Program have been

met. The format of the checklist shall be placed on the Institute’s

website for the information of members of the institute.

4.2. Review Report

4.2.1. At the conclusion of the Practice Review, the Reviewer shall prepare a

draft report within 30 days, setting out Reportable Deficiencies and

Non-Reportable Matters.

4.2.2. After completion of the review, the Reviewer shall discuss the

Reportable Deficiencies, if any, in the draft report with a representative

of the Firm and may revise the draft report.

4.2.3. The Director of Practice Review shall discuss the draft report with the

Reviewer to ensure that all Reportable Deficiencies have been

adequately identified and appropriately reported and the draft report

conforms to the requirement of the Practice Review.

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4.2.4. The Director of Practice Review may also discuss the report with the

Firm.

4.2.5. On conclusion of the review by the Director of Practice Review, the draft

report will be delivered to the firm for comments to be provided within

21 days.

4.2.6. The Director of Practice Review or a Reviewer may require the firm to

provide written confirmation of any actions planned by the firm to

address deficiencies.

4.2.7. If the Firm disagrees with a Reportable Deficiency listed in the report,

it may provide explanation and documentation to support its position.

4.2.8. The Director of Practice Review or a Reviewer may amend the draft

report as appropriate, taking into consideration any matters arising from

paragraph 4.2.3 to paragraph 4.2.7, concluding with recommendations

as to a course of action and submit the final report to the relevant bench

of the Committee for review.

4.2.9. The Director of Practice Review shall communicate the decision of

extending satisfactory report or otherwise of the Committee or the

Council as appropriate within fifteen days of the decision, to the firm.

4.3. Consideration and Determination by the Committee

4.3.1. The Committee shall consider the report and matters pertaining to the

Practice Review, or of a Re-Review, and may take one or more of the

following actions:

a) deem the Review or Re-Review complete and ratify the report of

Practice Review;

b) require the firm to provide further written submissions on the

intended correction of any identified deficiencies along with action

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plan in a prescribed format, and consider the matter further once

such submissions have been received or the time for making

submissions has expired;

c) require the firm or a member to be subject to full or partial Re-

Review within one year. However, Committee shall not allow

opportunity of more than two Re-Reviews to any firm or member

within one year from the date of first Practice Review;

d) require the firm or a member to undertake certain specified actions

in order to improve the overall standards of the Firm to ensure that

it conforms to the requirements of the Program;

e) subject to the approval of three-fourth majority of the members of

the Committee to refer the member to the Investigation Committee

for investigation, where the member has continuously failed to

implement the action plans and improve the standard of work after

two Re-Reviews; and/or

f) report to the Investigation Committee through Secretary on any

other matter relating to non-compliance with the Professional

Standards.

To educate and help improve the understanding of compliance

requirements by members / firms under the Program, the paragraphs

(e) and (f) above shall be applicable after three years from the effective

date of this Program.

4.3.2. The Committee shall not refer a matter to the Investigation Committee

or Secretary solely for the failure of a firm or a member, to produce a

document subject to a valid claim of legal privilege that has not been

waived.

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4.3.3. In determining the action to be taken pursuant to paragraph 4.3.1, the

Committee may consider, but will not be limited to, the following

matters:

a) the degree to which the requirements of the Practice Review have

been met;

b) the nature and severity of any identified deficiencies;

c) the cooperation of the firm or member;

d) implementation of action plan submitted as a result of an earlier

Practice Review or Re-review as the case may be; and

e) public interest;

4.3.4. A decision made by the Committee pursuant to paragraph 4.3.1(e) shall

be final unless a firm or a member files an appeal under Part VI of this

Program. Action taken or proposed to be taken against any partner of

a firm under this Program shall be limited to such partner without any

negative implications on other partner(s) of the firm or on the firm as a

whole.

4.3.5. The Investigation Committee and the Council shall proceed on the

recommendation of the Committee referred to in sub clause 4.3.1(e) in

accordance with the provisions of investigation envisaged in the

Ordinance and Bye-laws of the Institute.

4.3.6. The Committee shall ensure that its decision pursuant to paragraph

4.3.1(e) is communicated in writing to the firm or member through

Director of Practice Review within fifteen days from the date of such

decision.

4.3.7. Each Member covered in a review shall be awarded 20 CPD credit

hours after the successful completion of the Practice Review.

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PART V - RETENTION AND CONFIDENTIALITY

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5.1. File Retention

5.1.1. Any file created during a Practice Review shall be retained until the

Practice Review has been deemed complete by the Committee and

thereafter for a period of twelve months after the conclusion of Practice

Review Year in which the Practice Review was completed. However,

if a firm or a member makes an appeal under this Program against the

decision of the Committee, all files and documentation relevant for the

Practice Review shall be retained by the Firm, and the Institute till the

case attains finality or for a period of twelve months as described above

whichever is later.

5.1.2. Notwithstanding paragraph 5.1.1, the Institute shall at minimum retain

information required for administrative purposes till next Practice

Review date of the firm, including:

a) evidence that a Practice Review has been completed;

b) documentation identifying the firm or the member and client files

reviewed;

c) documentation that may assist in future review planning; and

d) any other documentation as required by the Committee.

5.2. Confidentiality

5.2.1. A member of the Committee, or any person acting on its behalf, or the

Director of Practice Review or any Reviewer, or a staff member of

Directorate of Practice Review, shall not make use of or disclose the

contents of any report, files, working paper files, books, documents or

other material reviewed, or any confidential information concerning the

affairs of any firm or a member or of its clients obtained in the course

of a Practice Review to anyone, except to the Director or Directorate of

the Practice Review, the Committee, the Appellate Forum and or the

Council as required under this Program.

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PART VI - Appeal

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6.1 - Appellate Forum

6.1.1 Two Appellate Forums (the Forum) shall be constituted by the Council under

the Program to provide grievance mechanism to firms or members not

satisfied with the outcome of the Practice Review, one each for the Northern

and Southern Regions.

6.1.2 The Forum shall comprise three members appointed by the Council, of which

two shall be from the members of the Institute who have been past members

of the Council and have served at-least one full term in the Council and one

shall be a person who has exercised the powers of, or has been, a judge of a

High Court or who is or has been, an advocate of a High Court and is qualified

to be a Judge of a High Court. Such person shall also act as Chairman of the

Forum.

6.1.3 The members of the Committee or of the Council shall not be nominated on

the Forum. A cooling off period of two years shall be required for eligibility to

be appointed at the Forum for the former members of the Committee or of the

Council.

6.1.4 The quorum for a meeting of the Forum shall be the majority of its members.

In case the Chairman is unable to attend the meeting, the members present

shall decide amongst themselves a person to act as Chairman at that meeting.

6.1.5 The term of the Forum shall be three years from the date of its constitution.

6.1.6 No member of the Forum shall serve for more than two consecutive terms of

two years each.

6.1.7 A member retiring after serving two consecutive terms shall be eligible for re-

appointment, after two years from the date of retirement.

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6.2 Filing of Appeal

6.2.1 Any member or a firm aggrieved by the decision of the Committee shall have

a right to appeal before the Forum within 30 days of such decision having been

communicated to the member or the firm, on the prescribed form and

accompanied by such documents and information as may be prescribed.

6.2.2 The Forum shall, at the request of the applicant, or on its own motion give a

personal hearing to the aggrieved member or authorized representative of the

firm, who must either be a lawyer or a member of the Institute.

6.2.3 The Committee shall authorize any of its members or any representative to

attend the hearing on its behalf.

6.2.4 Director of Practice review is also entitled to attend the hearing of the Forum,

if he so desires;

6.2.5 The Forum shall have the power to confirm, vary or reverse the original

recommendation/decision of the Committee that has been appealed. The

Forum can also remand the case to Director of Practice Review with

directions;

6.2.6 The decision of the Forum shall be final which shall be communicated to the

appellant with a copy to the Director of Practice Review and the Chairman of

the Committee.

6.2.7 The Forum shall preferably dispose of the appeal within 60 days from the date

of filing of appeal.

6.2.8 During the process of appeal, the Forum can grant relief to the firm or member

suspending the decision of the Committee.

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PART VII - MISCELLANEOUS

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7.1 Failure to Comply

7.1.1 Failure to comply with any provision of this Program, including a failure to

comply with any decision or requirement of the Committee, can be referred to

the Investigation Committee of the Institute under Section 20A of the

Chartered Accountants Ordinance, 1961.

7.2 Amendments/ Removal of Difficulties/ Effective Date

7.2.1 This Program may be altered or amended, by the Council.

7.2.2 The Council may provide guidance on matters not specifically covered under

this Program.

7.2.3 This Program shall become effective from October 1, 2020.

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PART VIII – SUPPORT BY THE INSTITUTE

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8.1 TECHNICAL HELPLINE

A Technical Helpline has been established on the Institute’s website, where

members can post their queries in relation to financial reporting, auditing or

ethics related matters. Guidance will also be provided through this helpline in

respect of matters arising from the provisions of this Program. The Helpline

may be accessed by visiting the Institute’s website

http://www.icap.net.pk/your-technical-helpline .

8.2 FREQUENTLY ASKED QUESTIONS (FAQs)

1. When the firm shall be subject to Practice Review under this program?

A firm, already in practice on the effective date of this program and in which at least

one member is engaged in providing Audit, Assurance or Related Services shall be

subject to Practice Review at any time after one year of effective date of this program.

2. Whether the program is applicable to all CA firms?

The program applies to all firms providing Audit, Assurance or Related Services

conducted under legal and financial reporting framework as applicable in Pakistan.

3. Whether the Audit, Assurance or Related Services provided to the private

limited companies by the firm shall be subject to Practice Review?

Yes, the program is applicable to all types of private limited companies.

4. Why this program is being implemented in the presence of QCR program?

QCR is a voluntary program undertaken by CA firms who intend to conduct audits of financial statements of listed and certain specified non-listed companies. The Institute is a member of the International Federation of Accountants (IFAC) and

http://www.icap.net.pk/your-technical-helpline

Page 33 of 34

there are Statements of Membership Obligations (SMOs) of IFAC which are needed to be complied with by its member bodies. SMO-1 of IFAC requires a mandatory quality assurance review system to be in place for firms performing audits of financial statements by virtue of which it should be ensured that the firms and its partners are in compliance with the quality standards for professional assignments

5. Does this program conflict with the existing QCR program of the Institute?

No, this program shall not be applicable to the firms which have attained satisfactory QCR rating under the QCR program of the Institute.

6. What if the name of any firm is removed from the list of firms having

satisfactory QCR rating under the QCR program of the Institute?

If the name of the firm is removed from the list of firms having satisfactory QCR rating, that firm shall be subject to this Program if it does not apply for review under the QCR Program within one year from the date of removal from the list of firms having satisfactory QCR rating.

7. What are the penalties for non-compliance with this program?

The Members’ Affairs Committee may with the approval of three-fourth majority of its members, refer the case to the Investigation Committee of the Institute where the member has continuously failed to implement the action plans and improve the standard of work after two Re-Reviews. The Members’ Affairs Committee may also

report to the Investigation Committee any other matter relating to non-compliance with professional standards.

8. What if the firm is restricted to produce any document to the Institute due to

absence of consent from its client?

The Committee shall not refer a matter to the Investigation Committee or Secretary solely for the failure of a firm or a member, to produce a document subject to a valid claim of legal privilege that has not been waived.

9. In case of any difficulty arising on the professional matters, whether any

guidance will be provided by the Institute?

Page 34 of 34

“Technical Helpline” is available on the Institute’s website for providing guidance on professional and other matters relating to the Program. Members can post their queries on the Helpline.

10. Whether an appeal can be filed against the decisions made under this

program?

There will be two Appellate Forums to provide grievance mechanism to firms or

members who are not satisfied with the outcome of the Practice Review, one each

for the Northern and Southern Regions.

11. What is the timeline to file an appeal before the Appellate Forum?

Any member or a firm aggrieved by the decision of the Committee shall have a right

to appeal before the Forum within 30 days of such decision having been

communicated to the member or the firm.

12. Whether the decision of the Appellate Forum can be challenged?

No, the decision of the Appellate Forum shall be final.

13. What is meant by ‘Related Services’?

Related Services comprise of ‘Compilation’ and ‘Agreed Upon Procedures’ engagements. There are separate International Standards on Related Services (ISRS) for each of the above engagements. These standards explain the auditor’s professional responsibilities along with the form and content of the reports that the auditor issues in connection with such engagements. The objective of an agreed-upon procedures engagement is for the auditor to carry out procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings. The objective of a compilation engagement is for the accountant to use accounting expertise, as opposed to auditing expertise, to collect, classify and summarize financial information.

MEMBERS' HANDBOOK

PART IV

5. PRACTICE ADMINISTRATION

AS MANAGEMENT CONSULTANTS


SECTIONAL INDEX

5.0 Practice Administration as Management Consultants

CONTENTS

5.01 Engagement in Management Consultancy business

5.02 Formation of Companies for Management Consultancy

5.03 Use of Foreign names for Management Consultancy

5.01

ENGAGEMENT IN MANAGEMENT CONSULTANCY BUSINESS

1. A Chartered Accountant can practice either as a Chartered Accountant or only as a Management Consultant as sole proprietor, through a partnership firm or a limited liability company. In case he opts to practice as a Chartered Accountant he can engage in all those functions which a Chartered Accountant in practice undertakes including management consultancy after obtaining the certificate of practice as a Chartered Accountant under Bye-Law 8 of C.A. Bye- laws 1983.

Management Consultancy Practice by Chartered Accountants in practice 2. A Chartered Accountant in practice can also engage in management

consultancy practice by forming a separate sole proprietary concern, partnership firm or a company. In case he wishes to associate non- members, he is required to form a company and to undertake that such non-members would observe the bye-laws and code of professional ethics of the Institute.

3. The practicing Chartered Accountants who wish to practice as

"management consultants" through a limited liability company can style themselves as "Management Consultants" under the company's name e.g. XYZ Co., Ltd., Management Consultants". There should, however be separate sign boards and stationery for practice as “"Chartered Accountants”" and as “Management Consultants.”

4. However, the designation "Management Consultants" cannot be used by

the practicing Chartered Accountants either individually or by sole proprietary concern or a partnership firm.

Management Consultancy Practice by Members Not in Practice as Chartered Accountants

5.01

5. A member who is interested in practicing only as a Management Consultant, can engage in such practice either as sole proprietor or through a partnership firm or a limited company after obtaining a certificate of practice to practice as "Management Consultant" under Bye- law 8 of the C.A. Bye-Laws, 1983.

6. Such members should be entitled to practice only as Management Consultants and cannot engage in other functions which are normally under-taken by Chartered Accountants in practice.

7. In case a member wishes to associate non-member in his Management Consultancy practice he could do so only in case of practice as a limited liability company and he would undertake that such non-member would observe the bye- laws and code of professional ethics of the Institute.

8. In case a member not practicing as a Chartered Accountant is associated

with a Management Consultancy practice he would be required to obtain a certificate of practice as a "Management Consultant".

9. The obligation to ensure that non-members observe the bye- laws and code of professional ethics of the Institute under clause 10 of Part-2 of Schedule-I of the Chartered Accountants Ordinance, 1961 would arise if a member associates with non-members in any of the following capacities:

(a) a shareholder in a management consultancy company

(b) a director of the management consultancy company

(c) a shareholder and a director of the management consultancy company.

10. However, association as an employee or an Executive Director in a management consultancy company would not attract the above requirement.

5.01

11. The above directive summarizes the official amendment in Bye- law 8 of the Bye- laws of the Institute and various decisions of the Council and substitutes the earlier directives issued as 5.01 and 5.02 of Volume I of the Members' Handbook.

(106th meeting of the Council - July 9-10, 1994)

5.02

FORMATION OF COMPANIES FOR MANAGEMENT CONSULTANCY The Council of the Institute has noted that certain members of the Institute form companies to practice as Management Consultants without any intimation to the Institute. The members should note that the words "shall be permitted" used in the proviso to Section 23 of the Chartered Accountants Ordinance, 1961 (as amended) do not ipso facto permit formation of a limited company by the Chartered Accountants for the practices of Management Consultancy. The members are required to obtain permission from the Council in this regard which is granted immediately on fulfilling the following requirements:

(i) The application should be on prescribed From "Z" (specimen enclosed). (ii) Compliance with the requirements of Part 2 of Schedules I and II

of the C.A. Ordinance, 1961. (iii) The name of the Company is in accordance with Council's

Directive 4.06. (iv) Proposed Memorandum and Articles of Association.

The above requirements are aimed at ensuring that the Institute has complete record of the members practicing as Management Consultants and that the practice is in accordance with the Ordinance, Bye- laws and the Directive 5.01 of the Council.

(121st meeting of the Council - May 29, 1997)

5.03 (Revised – 2005)

USE OF FOREIGN NAMES FOR MANAGEMENT CONSULTANCY

The Council of the Institute has decided to give permission to the members who wish to practice as Management Consultants by forming a limited liability company (the "Company") using a foreign name attached to a local name. Use of abbreviation of local and/or foreign names is also permitted for this purpose. The term foreign name, as used in this directive, means a known name of an international firm / company of Management Consultants ("Foreign Firm") recognized by a foreign professional body, approved by the Council for this purpose. The Foreign Firm shall have given a formal permission for the sole use of its name by the Company in Pakistan. The Institute of Chartered Accountants of Pakistan (ICAP) itself, before granting the requisite permission, shall obtain confirmation from the Foreign Firm that it has given permission for the sole use of its name by the Company. Company/ies which will have been granted permission by ICAP to use a foreign name on the terms stated above shall comply with other requirements prescribed by the Institute from time to time. For Further guidance on the issue of foreign names, members are advised to refer to Directive 4.06 (Revised-2005)

(171st meeting of the Council - April 29, 2005)

MEMBERS' HANDBOOK

PART IV

6. ETHICS


Code of Ethics for

Chartered Accountants (Revised 2019)

NavaidHussain

Typewritten Text

NavaidHussain

Typewritten Text

NavaidHussain

Typewritten Text

6.04

CODE OF ETHICS FOR CHARTERED ACCOUNTANTS

The "Code of Ethics for Chartered Accountants (Revised 2019)" is based on the Handbook

of the International Code of Ethics for Professional Accountants, 2018 Edition of the

International Ethics Standards Board for Accountants, published by the International

Federation of Accountants (IFAC) in July 2018 and is used with permission of IFAC.

Handbook of the International Code of Ethics for Professional Accountants, 2018 Edition

© July 2018 by the International Federation of Accountants.

Contact [email protected] for permission to reproduce, store or transmit, or to make

other similar uses of this document.


TABLE OF CONTENTS Page 1 of 263

TABLE OF CONTENTS

Historical Background ................................................................................................................................ 6

Foreword .......................................................................................................................................................... 7

Preface .............................................................................................................................................................. 8

Part 1 - Complying with the Code, Fundamental Principles and Conceptual

sFramework ..................................................................................................................................... 10

Part 2 - Chartered Accountants in Business ....................................................................................... 27

Part 3 - Chartered Accountants in Practice ........................................................................................ 68

International Independence Standards (Parts 4A and 4B)

Part 4A - Independence for Audit and Review Engagement .................................................... 124

Part 4B - Independence for Assurance Engagements Other than Audit and Review

ddfEngagements ........................................................................................................................... 210

Glossary, including Lists of Abbreviations .................................................................... 252

Effective Date ................................................................................................................. 263


Page 2 of 263 OVERVIEW OF THE CODE

OVERVIEW OF THE CODE

PART 1 COMPLYING WITH THE CODE,

FUNDAMENTAL PRINCIPLES AND CONCEPTUAL FRAMEWORK (ALL CHARTERED ACCOUNTANTS - SECTIONS 100 TO 199)

PART 2

CHARTERED ACCOUNTANTS IN BUSINESS (SECTIONS 200 TO 299)

(PART 2 IS ALSO APPLICABLE TO INDIVIDUAL CHARTERED

ACCOUNTANTS IN PRACTICE WHEN PERFORMING PROFESSIONAL ACTIVITIES

PURSUANT TO THEIR RELATIONSHIP WITH THE FIRM)

PART 3

CHARTERED ACCOUNTANTS IN PRACTICE (SECTIONS 300 TO 399)

(PARTS 4A AND 4B)

INTERNATIONAL INDEPENDENCE STANDARDS

PART 4A

INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS (SECTIONS 400 TO 899)

PART 4B

INDEPENDENCE FOR ASSURANCE ENGAGEMENTS

OTHER THAN AUDIT AND REVIEW ENGAGEMENTS (SECTIONS 900 TO 999)

GLOSSARY (ALL CHARTERED ACCOUNTANTS)



TABLE OF CONTENTS

HISTORICAL BACKGROUND .................................................................................... 6

FOREWORD .................................................................................................................... 7

PREFACE ......................................................................................................................... 8

PART 1 - COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES

AND CONCEPTUAL FRAMEWORK ...................................................... 10

100 Complying with the Code ...................................................................................... 11

110 The Fundamental Principles .................................................................................. 13

111 Integrity ................................................................................................................................. 14

112 Objectivity ........................................................................................................................... 15

113 Professional Competence and Due Care ................................................................... 15

114 Confidentiality .................................................................................................................... 16

115 Professional Behavior ...................................................................................................... 18

120 The Conceptual Framework ................................................................................... 19

PART 2 - CHARTERED ACCOUNTANTS IN BUSINESS ...................................... 27

200 Applying the Conceptual Framework – Chartered Accountants in Business ........ 28

210 Conflicts of Interest ............................................................................................... 33

220 Preparation and Presentation of Information ......................................................... 36

230 Acting with Sufficient Expertise ............................................................................ 42

240 Financial Interests, Compensation and Incentives Linked to Financial Reporting

and Decision Making ............................................................................................. 44

250 Inducements, Including Gifts and Hospitality ....................................................... 46

260 Responding to Non-Compliance with Laws and Regulations ................................ 53

270 Pressure to Breach the Fundamental Principles ..................................................... 64

PART 3 - CHARTERED ACCOUNTANTS IN PRACTICE ..................................... 68

300 Applying the Conceptual Framework – Chartered Accountants in Practice .......... 69

310 Conflicts of Interest ............................................................................................... 77

320 Professional Appointments .................................................................................... 84

321 Second Opinions .................................................................................................... 89

330 Fees and Other Types of Remuneration ................................................................. 90

340 Inducements, Including Gifts and Hospitality ....................................................... 92

350 Custody of Client Assets ........................................................................................ 99


Page 4 of 263 TABLE OF CONTENTS

360 Responding to Non-Compliance with Laws and Regulations .............................. 100

370 Public Notices, Announcements and Communications Undue Publicity be

Avoided ................................................................................................................ 117

INTERNATIONAL INDEPENDENCE STANDARDS (PARTS 4A AND 4B)

PART 4A - INDEPENDENCE FOR AUDIT AND REVIEW

ENGAGEMENTS ..................................................................................... 124

400 Applying the Conceptual Framework to Independence for Audit and Review

Engagements ........................................................................................................ 125

410 Fees ...................................................................................................................... 140

411 Compensation and Evaluation Policies ................................................................ 144

420 Gifts and Hospitality ............................................................................................ 145

430 Actual or Threatened Litigation ........................................................................... 146

510 Financial Interests ................................................................................................ 147

511 Loans and Guarantees .......................................................................................... 153

520 Business Relationships......................................................................................... 155

521 Family and Personal Relationships ...................................................................... 157

522 Recent Service with an Audit Client .................................................................... 161

523 Serving as a Director or Officer of an Audit Client ............................................. 163

524 Employment with an Audit Client ....................................................................... 164

525 Temporary Personnel Assignments ..................................................................... 168

540 Long Association of Personnel (Including Partner Rotation) with an Audit

Client.................................................................................................................... 169

600 Provision of Non-Assurance Services to an Audit Client .................................... 175

601 Accounting and Bookkeeping Services ................................................................... 180

602 Administrative Services ................................................................................................ 183

603 Valuation Services .......................................................................................................... 184

604 Tax Services ...................................................................................................................... 186

605 Internal Audit Services .................................................................................................. 192

606 Information Technology Systems Services ............................................................ 196

607 Litigation Support Services .......................................................................................... 198

608 Legal Services................................................................................................................... 199

609 Recruiting Services ......................................................................................................... 201

610 Corporate Finance Services ......................................................................................... 203



800 Reports on Special Purpose Financial Statements that Include a Restriction on

Use and Distribution (Audit and Review Engagements) ..................................... 206

PART 4B - INDEPENDENCE FOR ASSURANCE ENGAGEMENTS

OTHER THAN AUDIT AND REVIEW ENGAGEMENTS ................ 210

900 Applying the Conceptual Framework to Independence for Assurance

Engagements Other than Audit and Review Engagements .................................. 211

905 Fees ...................................................................................................................... 220

906 Gifts and Hospitality ............................................................................................ 222

907 Actual or Threatened Litigation ........................................................................... 223

910 Financial Interests ................................................................................................ 224

911 Loans and Guarantees .......................................................................................... 228

920 Business Relationships......................................................................................... 230

921 Family and Personal Relationships ...................................................................... 232

922 Recent Service with an Assurance Client ............................................................ 236

923 Serving as a Director or Officer of an Assurance Client ...................................... 238

924 Employment with an Assurance Client ................................................................ 239

940 Long Association of Personnel with an Assurance Client ................................... 242

950 Provision of Non-Assurance Services to Assurance Clients Other than Audit and

Review Engagement Clients ................................................................................ 245

990 Reports that Include a Restriction on Use and Distribution (Assurance

Engagements Other than Audit and Review Engagements) ................................ 249

GLOSSARY, INCLUDING LISTS OF ABBREVIATIONS .................................... 252

EFFECTIVE DATE ..................................................................................................... 263


Page 6 of 263 HISTORICAL BACKGROUND

HISTORICAL BACKGROUND

1969-70 "Green Book" became part of Members' Handbook

July 1990 IFAC Code of Ethics for Professional Accountants was adopted

for the first time

April 2000 Code of Ethics was revised by Council

February 2003 Section 7 'Publicity and Advertising by Chartered Accountants'

was changed

August 2004 Code of Ethics was amended by Council

May 2005 Section 9 'Independence' and Definitions were replaced with new

IFAC requirements

May 2008 Code of Ethics was revised by Council

April 2015 Code of Ethics was revised by Council


FOREWORD Page 7 of 263

FOREWORD

The accounting profession has a vital role in society. The accounting profession’s

unwavering commitment to serve public interest is like an unbreakable chain, running

throughout our profession, connecting all of us.

The recognition of the value that the profession brings to the society translates into the

public trust invested in the profession. Our commitment to serve public interest is a huge

responsibility, however, it is the chief attribute through which we have generated goodwill

and great standing for our profession over the centuries. Importantly, the profession has to

continuously reinforce and elevate its goodwill in the evolving and challenging business

and regulatory environment. The significance and the role of ethical practices has become

more and more central.

Our Institute’s vision defines and dictates that professional excellence can only be achieved

by upholding the principles of integrity, transparency and accountability. To fulfill its

vision, the Institute sets the standards of professional ethics and professional behaviour for

chartered accountants. These ethical standards set out the professional responsibilities and

duties owed by chartered accountants to their clients, employers, the authorities and the

public at large.

The Institute is a member of the International Federation of Accountants (IFAC). It is

committed to the IFAC’s broad objective of developing and enhancing a coordinated and

coherent worldwide accountancy profession with common standards. In this regard, the

Institute, as an obligation of its IFAC membership, is obliged to support the work of IFAC

by:

a) informing its members of every pronouncement developed by IFAC, and

b) implementing to the extent possible under local circumstances.

IFAC has issued the restructured Code of Ethics for Professional Accountants which

includes substantive revisions and is completely rewritten under a new structure and

drafting convention. The restructured Code has been issued after extensive research and

global stakeholder consultation.

The Council takes great pleasure in the adoption of the revised Code of Ethics for Chartered

Accountants that is based on the IFAC restructured Code of Ethics. The revised Code of

Ethics for Chartered Accountants contains all-around and multifaceted improvements,

including the Code's structure and applicability, formatting and drafting, reinforced

conceptual framework and ethical requirements and guidance.

Our members are expected to adhere to the ethical requirements of the restructured Code

of Ethics and exhibit the highest standards of ethics and professional conduct that are

expected of our profession.

Jafar Husain

President

Karachi, September 30, 2019


Page 8 of 263 PREFACE

PREFACE

The revised IESBA Code

In April 2015, the Institute's last Code of Ethics was revised and issued to members. In

April 2018, the International Ethics Standards Board for Accountants (IESBA) of IFAC

issued a revised and restructured Code of Ethics for Professional Accountants which

brought significant changes in the structure of the Code and substantially strengthened the

independence requirements of auditors and clarified other requirements for all professional

accountants.

The latest edition of the Handbook of the IESBA Code of Ethics was issued in July 2018

which replaces the previous editions of the Code. Since 2015 to 2018, major structural

changes and new requirements have been introduced by IESBA in the Code.

In order to adopt the same, the Auditing Standards and Ethics Committee of the Institute

made an exhaustive study of the IESBA Codes issued from 2015 to 2018 and recommended

latest Code of IESBA for adoption, subject to few changes. These changes are not in

conflict with the requirements of IESBA Code; rather make it more stringent and

principally arising out of the requirements of the Chartered Accountants Ordinance, 1961.

About the revised ICAP Code

The revised ICAP Code establishes a conceptual framework that requires a chartered

accountant to identify, evaluate, and address threats to compliance with the fundamental

principles. The conceptual framework approach assists chartered accountants in complying

with the ethical requirements of this Code and meeting their responsibility to act in the

public interest. When a chartered accountant identifies threats to compliance with the

fundamental principles and determines that they are not at an acceptable level, the chartered

accountant needs to ensure whether appropriate safeguards are available or not.

The revised ICAP Code entails ensuring compliance with the five fundamental principles

of professional ethics which are integrity, objectivity, professional competence and due

care, confidentiality and professional behavior. The revised ICAP Code applies to all

Chartered Accountants, whether in practice or not.

Chartered accountants are expected to demonstrate the highest standards of professional

conduct and to take into consideration the public interest. Ethical behavior by chartered

accountants plays a vital role in ensuring public trust in financial reporting and business

practices and upholding the reputation of the accountancy profession.

The Code of Ethics helps members of the Institute meet these obligations by providing

them with ethical guidance. The Code applies to all members, students, affiliates,

employees of member firms and, where applicable, member firms, in all of their

professional and business activities, whether remunerated or voluntary.


PREFACE Page 9 of 263

Adoption by the Council

Pursuant to clause (i) of sub-section (2) of Section 15 of the Chartered Accountants

Ordinance, 1961 (CA Ordinance) the Council in its 316th meeting held on July 25-26, 2019

has adopted the Code of Ethics for Chartered Accountants (Revised 2019) to be effective

from July 1, 2020.

The revised ICAP Code of Ethics is being issued as a Directive of the Council and any

violation of the provisions of the Code will fall under Part 4 of Schedule 1 of the CA

Ordinance.

Conflict with the Code and the CA Ordinance & Chartered Accountants Bye-Laws

In the event of any conflict between matters contained in this Code and CA Ordinance,

Chartered Accountants Bye-Laws, or any specific directive issued by the Council, the

provisions of CA Ordinance, Chartered Accountants Bye-Laws, and the specific directive

shall prevail in that order respectively.


Page 10 of 263 INDEX OF PART 1

PART 1 - COMPLYING WITH THE CODE, FUNDAMENTAL

PART 1 - PRINCIPLES AND CONCEPTUAL FRAMEWORK

Section 100 Complying with the Code ........................................................................... 11

Section 110 The Fundamental Principles ........................................................................ 13

Subsection 111 Integrity ...................................................................................... 14

Subsection 112 Objectivity .................................................................................. 15

Subsection 113 Professional Competence and Due Care ..................................... 15

Subsection 114 Confidentiality ............................................................................ 16

Subsection 115 Professional Behavior ................................................................. 18

Section 120 The Conceptual Framework ........................................................................ 19


SECTION 100 Page 11 of 263

PART 1 - COMPLYING WITH THE CODE, FUNDAMENTAL

PART 1 - PRINCIPLES AND CONCEPTUAL FRAMEWORK

SECTION 100

COMPLYING WITH THE CODE

General

100.1 A1 A distinguishing mark of the accountancy profession is its acceptance of the

responsibility to act in the public interest. A chartered accountant’s

responsibility is not exclusively to satisfy the needs of an individual client

or employing organization. Therefore, the Code contains requirements and

application material to enable chartered accountants to meet their

responsibility to act in the public interest.

100.2 A1 The requirements in the Code, designated with the letter “R,” impose

obligations.

100.2 A2 Application material, designated with the letter “A,” provides context,

explanations, suggestions for actions or matters to consider, illustrations and

other guidance relevant to a proper understanding of the Code. In particular,

the application material is intended to help a chartered accountant to

understand how to apply the conceptual framework to a particular set of

circumstances and to understand and comply with a specific requirement.

While such application material does not of itself impose a requirement,

consideration of the material is necessary to the proper application of the

requirements of the Code, including application of the conceptual

framework.

R100.3 A chartered accountant shall comply with the Code. There might be

circumstances where laws or regulations preclude an accountant from

complying with certain parts of the Code. In such circumstances, those laws

and regulations prevail, and the accountant shall comply with all other parts

of the Code.

100.3 A1 The principle of professional behavior requires a chartered accountant to

comply with relevant laws and regulations. Some jurisdictions might have

provisions that differ from or go beyond those set out in the Code.

Accountants in those jurisdictions need to be aware of those differences and

comply with the more stringent provisions unless prohibited by law or

regulation.

100.3 A2 A chartered accountant might encounter unusual circumstances in which the

accountant believes that the result of applying a specific requirement of the

Code would be disproportionate or might not be in the public interest. In


Page 12 of 263 SECTION 100

those circumstances, the accountant is encouraged to consult with a

professional or regulatory body.

Breaches of the Code

R100.4 Paragraphs R400.80 to R400.89 and R900.50 to R900.55 address a breach

of International Independence Standards. A chartered accountant who

identifies a breach of any other provision of the Code shall evaluate the

significance of the breach and its impact on the accountant’s ability to

comply with the fundamental principles. The accountant shall also:

(a) Take whatever actions might be available, as soon as possible, to

address the consequences of the breach satisfactorily; and

(b) Determine whether to report the breach to the relevant parties.

100.4 A1 Relevant parties to whom such a breach might be reported include those who

might have been affected by it, a professional or regulatory body or an

oversight authority.



SECTION 110

THE FUNDAMENTAL PRINCIPLES

General

110.1 A1 There are five fundamental principles of ethics for chartered accountants:

(a) Integrity – to be straightforward and honest in all professional and

business relationships.

(b) Objectivity – not to compromise professional or business judgments

because of bias, conflict of interest or undue influence of others.

(c) Professional Competence and Due Care – to:

(i) Attain and maintain professional knowledge and skill at the

level required to ensure that a client or employing organization

receives competent professional service, based on current

technical and professional standards and relevant legislation;

and

(ii) Act diligently and in accordance with applicable technical and

professional standards.

(d) Confidentiality – to respect the confidentiality of information acquired

as a result of professional and business relationships.

(e) Professional Behavior – to comply with relevant laws and regulations

and avoid any conduct that the chartered accountant knows or should

know might discredit the profession.

R110.2 A chartered accountant shall comply with each of the fundamental

principles.

110.2 A1 The fundamental principles of ethics establish the standard of behavior

expected of a chartered accountant. The conceptual framework establishes

the approach which an accountant is required to apply to assist in complying

with those fundamental principles. Subsections 111 to 115 set out

requirements and application material related to each of the fundamental

principles.

110.2 A2 A chartered accountant might face a situation in which complying with one

fundamental principle conflicts with complying with one or more other

fundamental principles. In such a situation, the accountant might consider

consulting, on an anonymous basis if necessary, with:

Others within the firm or employing organization.



Those charged with governance.

A professional body.

A regulatory body.

Legal counsel.

However, such consultation does not relieve the accountant from the

responsibility to exercise professional judgment to resolve the conflict or, if

necessary, and unless prohibited by law or regulation, disassociate from the

matter creating the conflict.

110.2 A3 The chartered accountant is encouraged to document the substance of the

issue, the details of any discussions, the decisions made and the rationale for

those decisions.

SUBSECTION 111

INTEGRITY

R111.1 A chartered accountant shall comply with the principle of integrity, which

requires an accountant to be straightforward and honest in all professional

and business relationships.

111.1 A1 Integrity implies fair dealing and truthfulness.

R111.2 A chartered accountant shall not knowingly be associated with reports,

returns, communications or other information where the accountant believes

that the information:

(a) Contains a materially false or misleading statement;

(b) Contains statements or information provided recklessly; or

(c) Omits or obscures required information where such omission or

obscurity would be misleading.

111.2 A1 If a chartered accountant provides a modified report in respect of such a

report, return, communication or other information, the accountant is not in

breach of paragraph R111.2.

R111.3 When a chartered accountant becomes aware of having been associated with

information described in paragraph R111.2, the accountant shall take steps

to be disassociated from that information.



SUBSECTION 112

OBJECTIVITY

R112.1 A chartered accountant shall comply with the principle of objectivity, which

requires an accountant not to compromise professional or business judgment

because of bias, conflict of interest or undue influence of others.

R112.2 A chartered accountant shall not undertake a professional activity if a

circumstance or relationship unduly influences the accountant’s professional

judgment regarding that activity.

SUBSECTION 113

PROFESSIONAL COMPETENCE AND DUE CARE

R113.1 A chartered accountant shall comply with the principle of professional

competence and due care, which requires an accountant to:

(a) Attain and maintain professional knowledge and skill at the level

required to ensure that a client or employing organization receives

competent professional service, based on current technical and

professional standards and relevant legislation; and

(b) Act diligently and in accordance with applicable technical and

professional standards.

113.1 A1 Serving clients and employing organizations with professional competence

requires the exercise of sound judgment in applying professional knowledge

and skill when undertaking professional activities.

113.1 A2 Maintaining professional competence requires a continuing awareness and

an understanding of relevant technical, professional and business

developments. Continuing professional development enables a chartered

accountant to develop and maintain the capabilities to perform competently

within the professional environment.

113.1 A3 Diligence encompasses the responsibility to act in accordance with the

requirements of an assignment, carefully, thoroughly and on a timely basis.

R113.2 In complying with the principle of professional competence and due care, a

chartered accountant shall take reasonable steps to ensure that those working

in a professional capacity under the accountant’s authority have appropriate

training and supervision.

R113.3 Where appropriate, a chartered accountant shall make clients, the employing

organization, or other users of the accountant’s professional services or

activities, aware of the limitations inherent in the services or activities.



SUBSECTION 114

CONFIDENTIALITY

R114.1 A chartered accountant shall comply with the principle of confidentiality,

which requires an accountant to respect the confidentiality of information

acquired as a result of professional and business relationships. An

accountant shall:

(a) Be alert to the possibility of inadvertent disclosure, including in a

social environment, and particularly to a close business associate or

an immediate or a close family member;

(b) Maintain confidentiality of information within the firm or employing

organization;

(c) Maintain confidentiality of information disclosed by a prospective

client or employing organization;

(d) Not disclose confidential information acquired as a result of

professional and business relationships outside the firm or employing

organization without proper and specific authority, unless there is a

legal or professional duty or right to disclose;

(e) Not use confidential information acquired as a result of professional

and business relationships for the personal advantage of the

accountant or for the advantage of a third party;

(f) Not use or disclose any confidential information, either acquired or

received as a result of a professional or business relationship, after

that relationship has ended; and

(g) Take reasonable steps to ensure that personnel under the accountant’s

control, and individuals from whom advice and assistance are

obtained, respect the accountant’s duty of confidentiality.

114.1 A1 Confidentiality serves the public interest because it facilitates the free flow

of information from the chartered accountant’s client or employing

organization to the accountant in the knowledge that the information will not

be disclosed to a third party. Nevertheless, the following are circumstances

where chartered accountants are or might be required to disclose confidential

information or when such disclosure might be appropriate:

(a) Disclosure is required by law, for example:

(i) Production of documents or other provision of evidence in the

course of legal proceedings; or



(ii) Disclosure to the appropriate public authorities of infringements

of the law that come to light;

(b) Disclosure is permitted by law and is authorized by the client or the

employing organization; and

(c) There is a professional duty or right to disclose, when not prohibited

by law:

(i) To comply with the quality review of a professional body;

(ii) To respond to an inquiry or investigation by a professional or

regulatory body;

(iii) To protect the professional interests of a chartered accountant

in legal proceedings; or

(iv) To comply with technical and professional standards, including

ethics requirements.

114.1 A2 In deciding whether to disclose confidential information, factors to consider,

depending on the circumstances, include:

Whether the interests of any parties, including third parties whose

interests might be affected, could be harmed if the client or employing

organization consents to the disclosure of information by the

chartered accountant.

Whether all the relevant information is known and substantiated, to

the extent practicable. Factors affecting the decision to disclose

include:

o Unsubstantiated facts.

o Incomplete information.

o Unsubstantiated conclusions.

The proposed type of communication, and to whom it is addressed.

Whether the parties to whom the communication is addressed are

appropriate recipients.

R114.2 A chartered accountant shall continue to comply with the principle of

confidentiality even after the end of the relationship between the accountant

and a client or employing organization. When changing employment or

acquiring a new client, the accountant is entitled to use prior experience but

shall not use or disclose any confidential information acquired or received

as a result of a professional or business relationship.



SUBSECTION 115

PROFESSIONAL BEHAVIOR

R115.1 A chartered accountant shall comply with the principle of professional

behavior, which requires an accountant to comply with relevant laws and

regulations and avoid any conduct that the accountant knows or should know

might discredit the profession. A chartered accountant shall not knowingly

engage in any business, occupation or activity that impairs or might impair

the integrity, objectivity or good reputation of the profession, and as a result

would be incompatible with the fundamental principles.

115.1 A1 Conduct that might discredit the profession includes conduct that a

reasonable and informed third party would be likely to conclude adversely

affects the good reputation of the profession.



SECTION 120

THE CONCEPTUAL FRAMEWORK

Introduction

120.1 The circumstances in which chartered accountants operate might create

threats to compliance with the fundamental principles. Section 120 sets out

requirements and application material, including a conceptual framework,

to assist accountants in complying with the fundamental principles and

meeting their responsibility to act in the public interest. Such requirements

and application material accommodate the wide range of facts and

circumstances, including the various professional activities, interests and

relationships, that create threats to compliance with the fundamental

principles. In addition, they deter accountants from concluding that a

situation is permitted solely because that situation is not specifically

prohibited by the Code.

120.2 The conceptual framework specifies an approach for a chartered accountant

to:

(a) Identify threats to compliance with the fundamental principles;

(b) Evaluate the threats identified; and

(c) Address the threats by eliminating or reducing them to an acceptable

level.

Requirements and Application Material

General

R120.3 The chartered accountant shall apply the conceptual framework to identify,

evaluate and address threats to compliance with the fundamental principles

set out in Section 110.

120.3 A1 Additional requirements and application material that are relevant to the

application of the conceptual framework are set out in:

(a) Part 2 – Chartered Accountants in Business;

(b) Part 3 – Chartered Accountants in Practice; and

(c) International Independence Standards, as follows:

(i) Part 4A – Independence for Audit and Review Engagements;

and



(ii) Part 4B – Independence for Assurance Engagements Other than

Audit and Review Engagements.

R120.4 When dealing with an ethics issue, the chartered accountant shall consider

the context in which the issue has arisen or might arise. Where an individual

who is a chartered accountant in practice is performing professional

activities pursuant to the accountant’s relationship with the firm, whether as

a contractor, employee or owner, the individual shall comply with the

provisions in Part 2 that apply to these circumstances.

R120.5 When applying the conceptual framework, the chartered accountant shall:

(a) Exercise professional judgment;

(b) Remain alert for new information and to changes in facts and

circumstances; and

(c) Use the reasonable and informed third party test described in

paragraph 120.5 A4.

Exercise of Professional Judgment

120.5 A1 Professional judgment involves the application of relevant training,

professional knowledge, skill and experience commensurate with the facts

and circumstances, including the nature and scope of the particular

professional activities, and the interests and relationships involved. In

relation to undertaking professional activities, the exercise of professional

judgment is required when the chartered accountant applies the conceptual

framework in order to make informed decisions about the courses of actions

available, and to determine whether such decisions are appropriate in the

circumstances.

120.5 A2 An understanding of known facts and circumstances is a prerequisite to the

proper application of the conceptual framework. Determining the actions

necessary to obtain this understanding and coming to a conclusion about

whether the fundamental principles have been complied with also require

the exercise of professional judgment.

120.5 A3 In exercising professional judgment to obtain this understanding, the

chartered accountant might consider, among other matters, whether:

There is reason to be concerned that potentially relevant information

might be missing from the facts and circumstances known to the

accountant.

There is an inconsistency between the known facts and circumstances

and the accountant’s expectations.



The accountant’s expertise and experience are sufficient to reach a

conclusion.

There is a need to consult with others with relevant expertise or

experience.

The information provides a reasonable basis on which to reach a

conclusion.

The accountant’s own preconception or bias might be affecting the

accountant’s exercise of professional judgment.

There might be other reasonable conclusions that could be reached

from the available information.

Reasonable and Informed Third Party

120.5 A4 The reasonable and informed third party test is a consideration by the

chartered accountant about whether the same conclusions would likely be

reached by another party. Such consideration is made from the perspective

of a reasonable and informed third party, who weighs all the relevant facts

and circumstances that the accountant knows, or could reasonably be

expected to know, at the time the conclusions are made. The reasonable and

informed third party does not need to be an accountant, but would possess

the relevant knowledge and experience to understand and evaluate the

appropriateness of the accountant’s conclusions in an impartial manner.

Identifying Threats

R120.6 The chartered accountant shall identify threats to compliance with the

fundamental principles.

120.6 A1 An understanding of the facts and circumstances, including any professional

activities, interests and relationships that might compromise compliance

with the fundamental principles, is a prerequisite to the chartered

accountant’s identification of threats to such compliance. The existence of

certain conditions, policies and procedures established by the profession,

legislation, regulation, the firm, or the employing organization that can

enhance the accountant acting ethically might also help identify threats to

compliance with the fundamental principles. Paragraph 120.8 A2 includes

general examples of such conditions, policies and procedures which are also

factors that are relevant in evaluating the level of threats.

120.6 A2 Threats to compliance with the fundamental principles might be created by

a broad range of facts and circumstances. It is not possible to define every

situation that creates threats. In addition, the nature of engagements and



work assignments might differ and, consequently, different types of threats

might be created.

120.6 A3 Threats to compliance with the fundamental principles fall into one or more

of the following categories:

(a) Self-interest threat – the threat that a financial or other interest will

inappropriately influence a chartered accountant’s judgment or

behavior;

(b) Self-review threat – the threat that a chartered accountant will not

appropriately evaluate the results of a previous judgment made; or an

activity performed by the accountant, or by another individual within

the accountant’s firm or employing organization, on which the

accountant will rely when forming a judgment as part of performing

a current activity;

(c) Advocacy threat – the threat that a chartered accountant will promote

a client’s or employing organization’s position to the point that the

accountant’s objectivity is compromised;

(d) Familiarity threat – the threat that due to a long or close relationship

with a client, or employing organization, a chartered accountant will

be too sympathetic to their interests or too accepting of their work;

and

(e) Intimidation threat – the threat that a chartered accountant will be

deterred from acting objectively because of actual or perceived

pressures, including attempts to exercise undue influence over the

accountant.

120.6 A4 A circumstance might create more than one threat, and a threat might affect

compliance with more than one fundamental principle.

Evaluating Threats

R120.7 When the chartered accountant identifies a threat to compliance with the

fundamental principles, the accountant shall evaluate whether such a threat

is at an acceptable level.

Acceptable Level

120.7 A1 An acceptable level is a level at which a chartered accountant using the

reasonable and informed third party test would likely conclude that the

accountant complies with the fundamental principles.



Factors Relevant in Evaluating the Level of Threats

120.8 A1 The consideration of qualitative as well as quantitative factors is relevant in

the chartered accountant’s evaluation of threats, as is the combined effect of

multiple threats, if applicable.

120.8 A2 The existence of conditions, policies and procedures described in paragraph

120.6 A1 might also be factors that are relevant in evaluating the level of

threats to compliance with fundamental principles. Examples of such

conditions, policies and procedures include:

Corporate governance requirements.

Educational, training and experience requirements for the profession.

Effective complaint systems which enable the chartered accountant

and the general public to draw attention to unethical behavior.

An explicitly stated duty to report breaches of ethics requirements.

Professional or regulatory monitoring and disciplinary procedures.

Consideration of New Information or Changes in Facts and Circumstances

R120.9 If the chartered accountant becomes aware of new information or changes in

facts and circumstances that might impact whether a threat has been

eliminated or reduced to an acceptable level, the accountant shall re-evaluate

and address that threat accordingly.

120.9 A1 Remaining alert throughout the professional activity assists the chartered

accountant in determining whether new information has emerged or changes

in facts and circumstances have occurred that:

(a) Impact the level of a threat; or

(b) Affect the accountant’s conclusions about whether safeguards applied

continue to be appropriate to address identified threats.

120.9 A2 If new information results in the identification of a new threat, the chartered

accountant is required to evaluate and, as appropriate, address this threat.

(Ref: Paras. R120.7 and R120.10).

Addressing Threats

R120.10 If the chartered accountant determines that the identified threats to

compliance with the fundamental principles are not at an acceptable level,



the accountant shall address the threats by eliminating them or reducing them

to an acceptable level. The accountant shall do so by:

(a) Eliminating the circumstances, including interests or relationships,

that are creating the threats;

(b) Applying safeguards, where available and capable of being applied, to

reduce the threats to an acceptable level; or

(c) Declining or ending the specific professional activity.

Actions to Eliminate Threats

120.10 A1 Depending on the facts and circumstances, a threat might be addressed by

eliminating the circumstance creating the threat. However, there are some

situations in which threats can only be addressed by declining or ending the

specific professional activity. This is because the circumstances that created

the threats cannot be eliminated and safeguards are not capable of being

applied to reduce the threat to an acceptable level.

Safeguards

120.10 A2 Safeguards are actions, individually or in combination, that the chartered

accountant takes that effectively reduce threats to compliance with the

fundamental principles to an acceptable level.

Consideration of Significant Judgments Made and Overall Conclusions Reached

R120.11 The chartered accountant shall form an overall conclusion about whether the

actions that the accountant takes, or intends to take, to address the threats

created will eliminate those threats or reduce them to an acceptable level. In

forming the overall conclusion, the accountant shall:

(a) Review any significant judgments made or conclusions reached; and

(b) Use the reasonable and informed third party test.

Considerations for Audits, Reviews and Other Assurance Engagements

Independence

120.12 A1 Chartered accountants in practice are required by International

Independence Standards to be independent when performing audits,

reviews, or other assurance engagements. Independence is linked to the

fundamental principles of objectivity and integrity. It comprises:

(a) Independence of mind – the state of mind that permits the expression

of a conclusion without being affected by influences that compromise



professional judgment, thereby allowing an individual to act with

integrity, and exercise objectivity and professional skepticism.

(b) Independence in appearance – the avoidance of facts and

circumstances that are so significant that a reasonable and informed

third party would be likely to conclude that a firm’s or an audit or

assurance team member’s integrity, objectivity or professional

skepticism has been compromised.

120.12 A2 International Independence Standards set out requirements and application

material on how to apply the conceptual framework to maintain

independence when performing audits, reviews or other assurance

engagements. Chartered accountants and firms are required to comply with

these standards in order to be independent when conducting such

engagements. The conceptual framework to identify, evaluate and address

threats to compliance with the fundamental principles applies in the same

way to compliance with independence requirements. The categories of

threats to compliance with the fundamental principles described in

paragraph 120.6 A3 are also the categories of threats to compliance with

independence requirements.

Professional Skepticism

120.13 A1 Under auditing, review and other assurance standards, including those

issued by the IAASB, chartered accountants in practice are required to

exercise professional skepticism when planning and performing audits,

reviews and other assurance engagements. Professional skepticism and the

fundamental principles that are described in Section 110 are inter-related

concepts.

120.13 A2 In an audit of financial statements, compliance with the fundamental

principles, individually and collectively, supports the exercise of

professional skepticism, as shown in the following examples:

Integrity requires the chartered accountant to be straightforward and

honest. For example, the accountant complies with the principle of

integrity by:

(a) Being straightforward and honest when raising concerns about

a position taken by a client; and

(b) Pursuing inquiries about inconsistent information and seeking

further audit evidence to address concerns about statements that

might be materially false or misleading in order to make

informed decisions about the appropriate course of action in the

circumstances.



In doing so, the accountant demonstrates the critical assessment of

audit evidence that contributes to the exercise of professional

skepticism.

Objectivity requires the chartered accountant not to compromise

professional or business judgment because of bias, conflict of interest

or the undue influence of others. For example, the accountant

complies with the principle of objectivity by:

(a) Recognizing circumstances or relationships such as familiarity

with the client, that might compromise the accountant’s

professional or business judgment; and

(b) Considering the impact of such circumstances and relationships

on the accountant’s judgment when evaluating the sufficiency

and appropriateness of audit evidence related to a matter

material to the client’s financial statements.

In doing so, the accountant behaves in a manner that contributes to

the exercise of professional skepticism.

Professional competence and due care requires the chartered

accountant to have professional knowledge and skill at the level

required to ensure the provision of competent professional service,

and to act diligently in accordance with applicable standards, laws

and regulations. For example, the accountant complies with the

principle of professional competence and due care by:

(a) Applying knowledge that is relevant to a particular client’s

industry and business activities in order to properly identify

risks of material misstatement;

(b) Designing and performing appropriate audit procedures; and

(c) Applying relevant knowledge when critically assessing whether

audit evidence is sufficient and appropriate in the

circumstances.

In doing so, the accountant behaves in a manner that contributes to

the exercise of professional skepticism.


INDEX OF PART 2 Page 27 of 263

PART 2 - CHARTERED ACCOUNTANTS IN BUSINESS

Section 200 Applying the Conceptual Framework – Chartered Accountants in

Business ................................................................................................ 28

Section 210 Conflicts of Interest ............................................................................... 33

Section 220 Preparation and Presentation of Information ......................................... 36

Section 230 Acting with Sufficient Expertise ............................................................ 42

Section 240 Financial Interests, Compensation and Incentives Linked to Financial

Reporting and Decision Making ............................................................ 44

Section 250 Inducements, Including Gifts and Hospitality ....................................... 46

Section 260 Responding to Non-Compliance with Laws and Regulations ............... 53

Section 270 Pressure to Breach the Fundamental Principles ..................................... 64



PART 2 - CHARTERED ACCOUNTANTS IN BUSINESS

SECTION 200

APPLYING THE CONCEPTUAL FRAMEWORK – CHARTERED ACCOUNTANTS

IN BUSINESS

Introduction

200.1 This Part of the Code sets out requirements and application material for

chartered accountants in business when applying the conceptual framework

set out in Section 120. It does not describe all of the facts and circumstances,

including professional activities, interests and relationships, that could be

encountered by chartered accountants in business, which create or might

create threats to compliance with the fundamental principles. Therefore, the

conceptual framework requires chartered accountants in business to be alert

for such facts and circumstances.

200.2 Investors, creditors, employing organizations and other sectors of the

business community, as well as governments and the general public, might

rely on the work of chartered accountants in business. Chartered accountants

in business might be solely or jointly responsible for the preparation and

reporting of financial and other information, on which both their employing

organizations and third parties might rely. They might also be responsible

for providing effective financial management and competent advice on a

variety of business-related matters.

200.3 A chartered accountant in business might be an employee, contractor,

partner, director (executive or non-executive), owner-manager, or volunteer

of an employing organization. The legal form of the relationship of the

accountant with the employing organization has no bearing on the ethical

responsibilities placed on the accountant.

200.4 In this Part, the term “chartered accountant” refers to:

(a) A chartered accountant in business; and

(b) An individual who is a chartered accountant in practice when

performing professional activities pursuant to the accountant’s

relationship with the accountant’s firm, whether as a contractor,

employee or owner. More information on when Part 2 is applicable

to chartered accountants in practice is set out in paragraphs R120.4,

R300.5 and 300.5 A1.




General

R200.5 A chartered accountant shall comply with the fundamental principles set out

in Section 110 and apply the conceptual framework set out in Section 120 to

identify, evaluate and address threats to compliance with the fundamental

principles.

200.5 A1 A chartered accountant has a responsibility to further the legitimate

objectives of the accountant’s employing organization. The Code does not

seek to hinder accountants from fulfilling that responsibility, but addresses

circumstances in which compliance with the fundamental principles might

be compromised.

200.5 A2 Chartered accountants may promote the position of the employing

organization when furthering the legitimate goals and objectives of their

employing organization, provided that any statements made are neither false

nor misleading. Such actions usually would not create an advocacy threat.

200.5 A3 The more senior the position of a chartered accountant, the greater will be

the ability and opportunity to access information, and to influence policies,

decisions made and actions taken by others involved with the employing

organization. To the extent that they are able to do so, taking into account

their position and seniority in the organization, accountants are expected to

encourage and promote an ethics-based culture in the organization.

Examples of actions that might be taken include the introduction,

implementation and oversight of:

Ethics education and training programs.

Ethics and whistle-blowing policies.

Policies and procedures designed to prevent non-compliance with

laws and regulations.

Identifying Threats


a broad range of facts and circumstances. The categories of threats are

described in paragraph 120.6 A3. The following are examples of facts and

circumstances within each of those categories that might create threats for a

chartered accountant when undertaking a professional activity:



(a) Self-interest Threats

A chartered accountant holding a financial interest in, or

receiving a loan or guarantee from, the employing organization.

A chartered accountant participating in incentive compensation

arrangements offered by the employing organization.

A chartered accountant having access to corporate assets for

personal use.

A chartered accountant being offered a gift or special treatment

from a supplier of the employing organization.

(b) Self-review Threats

A chartered accountant determining the appropriate accounting

treatment for a business combination after performing the

feasibility study supporting the purchase decision.

(c) Advocacy Threats

A chartered accountant having the opportunity to manipulate

information in a prospectus in order to obtain favorable

financing.

(d) Familiarity Threats

A chartered accountant being responsible for the financial

reporting of the employing organization when an immediate or

close family member employed by the organization makes

decisions that affect the financial reporting of the organization.

A chartered accountant having a long association with

individuals influencing business decisions.

(e) Intimidation Threats

A chartered accountant or immediate or close family member

facing the threat of dismissal or replacement over a

disagreement about:

o The application of an accounting principle.

o The way in which financial information is to be reported.



An individual attempting to influence the decision-making

process of the chartered accountant, for example with regard to

the awarding of contracts or the application of an accounting

principle.

Evaluating Threats

200.7 A1 The conditions, policies and procedures described in paragraphs 120.6 A1

and 120.8 A2 might impact the evaluation of whether a threat to compliance

with the fundamental principles is at an acceptable level.

200.7 A2 The chartered accountant’s evaluation of the level of a threat is also

impacted by the nature and scope of the professional activity.

200.7 A3 The chartered accountant’s evaluation of the level of a threat might be

impacted by the work environment within the employing organization and

its operating environment. For example:

Leadership that stresses the importance of ethical behavior and the

expectation that employees will act in an ethical manner.

Policies and procedures to empower and encourage employees to

communicate ethics issues that concern them to senior levels of

management without fear of retribution.

Policies and procedures to implement and monitor the quality of

employee performance.

Systems of corporate oversight or other oversight structures and

strong internal controls.

Recruitment procedures emphasizing the importance of employing

high caliber competent personnel.

Timely communication of policies and procedures, including any

changes to them, to all employees, and appropriate training and

education on such policies and procedures.

Ethics and code of conduct policies.

200.7 A4 Chartered accountants might consider obtaining legal advice where they

believe that unethical behavior or actions by others have occurred, or will

continue to occur, within the employing organization.



Addressing Threats

200.8 A1 Sections 210 to 270 describe certain threats that might arise during the

course of performing professional activities and include examples of actions

that might address such threats.

200.8 A2 In extreme situations, if the circumstances that created the threats cannot be

eliminated and safeguards are not available or capable of being applied to

reduce the threat to an acceptable level, it might be appropriate for a

chartered accountant to resign from the employing organization.

Communicating with Those Charged with Governance

R200.9 When communicating with those charged with governance in accordance

with the Code, a chartered accountant shall determine the appropriate

individual(s) within the employing organization’s governance structure

with whom to communicate. If the accountant communicates with a

subgroup of those charged with governance, the accountant shall determine

whether communication with all of those charged with governance is also

necessary so that they are adequately informed.

200.9 A1 In determining with whom to communicate, a chartered accountant might

consider:

(a) The nature and importance of the circumstances; and

(b) The matter to be communicated.

200.9 A2 Examples of a subgroup of those charged with governance include an audit

committee or an individual member of those charged with governance.

R200.10 If a chartered accountant communicates with individuals who have

management responsibilities as well as governance responsibilities, the

accountant shall be satisfied that communication with those individuals

adequately informs all of those in a governance role with whom the

accountant would otherwise communicate.

200.10 A1 In some circumstances, all of those charged with governance are involved

in managing the employing organization, for example, a small business

where a single owner manages the organization and no one else has a

governance role. In these cases, if matters are communicated with

individual(s) with management responsibilities, and those individual(s) also

have governance responsibilities, the chartered accountant has satisfied the

requirement to communicate with those charged with governance.



SECTION 210

CONFLICTS OF INTEREST

Introduction

210.1 Chartered accountants are required to comply with the fundamental

principles and apply the conceptual framework set out in Section 120 to

identify, evaluate and address threats.

210.2 A conflict of interest creates threats to compliance with the principle of

objectivity and might create threats to compliance with the other

fundamental principles. Such threats might be created when:

(a) A chartered accountant undertakes a professional activity related to

a particular matter for two or more parties whose interests with

respect to that matter are in conflict; or

(b) The interest of a chartered accountant with respect to a particular

matter and the interests of a party for whom the accountant

undertakes a professional activity related to that matter are in

conflict.

A party might include an employing organization, a vendor, a customer, a

lender, a shareholder, or another party.

210.3 This section sets out specific requirements and application material relevant

to applying the conceptual framework to conflicts of interest.


General

R210.4 A chartered accountant shall not allow a conflict of interest to compromise

professional or business judgment.

210.4 A1 Examples of circumstances that might create a conflict of interest include:

Serving in a management or governance position for two employing

organizations and acquiring confidential information from one

organization that might be used by the chartered accountant to the

advantage or disadvantage of the other organization.

Undertaking a professional activity for each of two parties in a

partnership, where both parties are employing the accountant to

assist them to dissolve their partnership.



Preparing financial information for certain members of management

of the accountant’s employing organization who are seeking to

undertake a management buy-out.

Being responsible for selecting a vendor for the employing

organization when an immediate family member of the accountant

might benefit financially from the transaction.

Serving in a governance capacity in an employing organization that

is approving certain investments for the company where one of those

investments will increase the value of the investment portfolio of the

accountant or an immediate family member.

Conflict Identification

R210.5 A chartered accountant shall take reasonable steps to identify circumstances

that might create a conflict of interest, and therefore a threat to compliance

with one or more of the fundamental principles. Such steps shall include

identifying:

(a) The nature of the relevant interests and relationships between the

parties involved; and

(b) The activity and its implication for relevant parties.

R210.6 A chartered accountant shall remain alert to changes over time in the nature

of the activities, interests and relationships that might create a conflict of

interest while performing a professional activity.

Threats Created by Conflicts of Interest

210.7 A1 In general, the more direct the connection between the professional activity

and the matter on which the parties’ interests conflict, the more likely the

level of the threat is not at an acceptable level.

210.7 A2 An example of an action that might eliminate threats created by conflicts of

interest is withdrawing from the decision-making process related to the

matter giving rise to the conflict of interest.

210.7 A3 Examples of actions that might be safeguards to address threats created by

conflicts of interest include:

Restructuring or segregating certain responsibilities and duties.

Obtaining appropriate oversight, for example, acting under the

supervision of an executive or non-executive director.



Disclosure and Consent

General

210.8 A1 It is generally necessary to:

(a) Disclose the nature of the conflict of interest and how any threats

created were addressed to the relevant parties, including to the

appropriate levels within the employing organization affected by a

conflict; and

(b) Obtain consent from the relevant parties for the chartered accountant

to undertake the professional activity when safeguards are applied

to address the threat.

210.8 A2 Consent might be implied by a party’s conduct in circumstances where the

chartered accountant has sufficient evidence to conclude that the parties

know the circumstances at the outset and have accepted the conflict of

interest if they do not raise an objection to the existence of the conflict.

210.8 A3 If such disclosure or consent is not in writing, the chartered accountant is

encouraged to document:

(a) The nature of the circumstances giving rise to the conflict of interest;

(b) The safeguards applied to address the threats when applicable; and

(c) The consent obtained.

Other Considerations

210.9 A1 When addressing a conflict of interest, the chartered accountant is

encouraged to seek guidance from within the employing organization or

from others, such as a professional body, legal counsel or another

accountant. When making such disclosures or sharing information within

the employing organization and seeking guidance of third parties, the

principle of confidentiality applies.



SECTION 220

PREPARATION AND PRESENTATION OF INFORMATION

Introduction




220.2 Preparing or presenting information might create a self-interest, intimidation

or other threats to compliance with one or more of the fundamental

principles. This section sets out specific requirements and application

material relevant to applying the conceptual framework in such

circumstances.


General

220.3 A1 Chartered accountants at all levels in an employing organization are

involved in the preparation or presentation of information both within and

outside the organization.

220.3 A2 Stakeholders to whom, or for whom, such information is prepared or

presented, include:

Management and those charged with governance.

Investors and lenders or other creditors.

Regulatory bodies.

This information might assist stakeholders in understanding and evaluating

aspects of the employing organization’s state of affairs and in making

decisions concerning the organization. Information can include financial

and non-financial information that might be made public or used for internal

purposes.

Examples include:

Operating and performance reports.

Decision support analyses.

Budgets and forecasts.



Information provided to the internal and external auditors.

Risk analyses.

General and special purpose financial statements.

Tax returns.

Reports filed with regulatory bodies for legal and compliance

purposes.

220.3 A3 For the purposes of this section, preparing or presenting information

includes recording, maintaining and approving information.

R220.4 When preparing or presenting information, a chartered accountant shall:

(a) Prepare or present the information in accordance with a relevant

reporting framework, where applicable;

(b) Prepare or present the information in a manner that is intended

neither to mislead nor to influence contractual or regulatory

outcomes inappropriately;

(c) Exercise professional judgment to:

(i) Represent the facts accurately and completely in all material

respects;

(ii) Describe clearly the true nature of business transactions or

activities; and

(iii) Classify and record information in a timely and proper manner;

and

(d) Not omit anything with the intention of rendering the information

misleading or of influencing contractual or regulatory outcomes

inappropriately.

220.4 A1 An example of influencing a contractual or regulatory outcome

inappropriately is using an unrealistic estimate with the intention of avoiding

violation of a contractual requirement such as a debt covenant or of a

regulatory requirement such as a capital requirement for a financial

institution.



Use of Discretion in Preparing or Presenting Information

R220.5 Preparing or presenting information might require the exercise of discretion

in making professional judgments. The chartered accountant shall not

exercise such discretion with the intention of misleading others or

influencing contractual or regulatory outcomes inappropriately.

220.5 A1 Examples of ways in which discretion might be misused to achieve

inappropriate outcomes include:

Determining estimates, for example, determining fair value

estimates in order to misrepresent profit or loss.

Selecting or changing an accounting policy or method among two or

more alternatives permitted under the applicable financial reporting

framework, for example, selecting a policy for accounting for long-

term contracts in order to misrepresent profit or loss.

Determining the timing of transactions, for example, timing the sale

of an asset near the end of the fiscal year in order to mislead.

Determining the structuring of transactions, for example, structuring

financing transactions in order to misrepresent assets and liabilities

or classification of cash flows.

Selecting disclosures, for example, omitting or obscuring

information relating to financial or operating risk in order to mislead.

R220.6 When performing professional activities, especially those that do not require

compliance with a relevant reporting framework, the chartered accountant

shall exercise professional judgment to identify and consider:

(a) The purpose for which the information is to be used;

(b) The context within which it is given; and

(c) The audience to whom it is addressed.

220.6 A1 For example, when preparing or presenting pro forma reports, budgets or

forecasts, the inclusion of relevant estimates, approximations and

assumptions, where appropriate, would enable those who might rely on such

information to form their own judgments.

220.6 A2 The chartered accountant might also consider clarifying the intended

audience, context and purpose of the information to be presented.



Relying on the Work of Others

R220.7 A chartered accountant who intends to rely on the work of others, either

internal or external to the employing organization, shall exercise

professional judgment to determine what steps to take, if any, in order to

fulfill the responsibilities, set out in paragraph R220.4.

220.7 A1 Factors to consider in determining whether reliance on others is reasonable

include:

The reputation and expertise of, and resources available to, the other

individual or organization.

Whether the other individual is subject to applicable professional

and ethics standards.

Such information might be gained from prior association with, or from

consulting others about, the other individual or organization.

Addressing Information that is or Might be Misleading

R220.8 When the chartered accountant knows or has reason to believe that the

information with which the accountant is associated is misleading, the

accountant shall take appropriate actions to seek to resolve the matter.

220.8 A1 Actions that might be appropriate include:

Discussing concerns that the information is misleading with the

chartered accountant’s superior and/or the appropriate level(s) of

management within the accountant’s employing organization or

those charged with governance, and requesting such individuals to

take appropriate action to resolve the matter. Such action might

include:

o Having the information corrected.

o If the information has already been disclosed to the intended

users, informing them of the correct information.

Consulting the policies and procedures of the employing

organization (for example, an ethics or whistle-blowing policy)

regarding how to address such matters internally.



220.8 A2 The chartered accountant might determine that the employing organization

has not taken appropriate action. If the accountant continues to have reason

to believe that the information is misleading, the following further actions

might be appropriate provided that the accountant remains alert to the

principle of confidentiality:

Consulting with:

o A relevant professional body.

o The internal or external auditor of the employing organization.

o Legal counsel.

Determining whether any requirements exist to communicate to:

o Third parties, including users of the information.

o Regulatory and oversight authorities.

R220.9 If after exhausting all feasible options, the chartered accountant determines

that appropriate action has not been taken and there is reason to believe that

the information is still misleading, the accountant shall refuse to be or to

remain associated with the information.

220.9 A1 In such circumstances, it might be appropriate for a chartered accountant to

resign from the employing organization.

Documentation

220.10 A1 The chartered accountant is encouraged to document:

The facts.

The accounting principles or other relevant professional standards

involved.

The communications and parties with whom matters were discussed.

The courses of action considered.

How the accountant attempted to address the matter(s).




220.11 A1 Where threats to compliance with the fundamental principles relating to the

preparation or presentation of information arise from a financial interest,

including compensation and incentives linked to financial reporting and

decision making, the requirements and application material set out in Section

240 apply.

220.11 A2 Where the misleading information might involve non-compliance with laws

and regulations, the requirements and application material set out in Section

260 apply.

220.11 A3 Where threats to compliance with the fundamental principles relating to the

preparation or presentation of information arise from pressure, the

requirements and application material set out in Section 270 apply.



SECTION 230

ACTING WITH SUFFICIENT EXPERTISE

Introduction




230.2 Acting without sufficient expertise creates a self-interest threat to

compliance with the principle of professional competence and due care. This

section sets out specific requirements and application material relevant to

applying the conceptual framework in such circumstances.


General

R230.3 A chartered accountant shall not intentionally mislead an employing

organization as to the level of expertise or experience possessed.

230.3 A1 The principle of professional competence and due care requires that a

chartered accountant only undertake significant tasks for which the

accountant has, or can obtain, sufficient training or experience.

230.3 A2 A self-interest threat to compliance with the principle of professional

competence and due care might be created if a chartered accountant has:

Insufficient time for performing or completing the relevant duties.

Incomplete, restricted or otherwise inadequate information for

performing the duties.

Insufficient experience, training and/or education.

Inadequate resources for the performance of the duties.

230.3 A3 Factors that are relevant in evaluating the level of such a threat include:

The extent to which the chartered accountant is working with others.

The relative seniority of the accountant in the business.

The level of supervision and review applied to the work.



230.3 A4 Examples of actions that might be safeguards to address such a self-interest

threat include:

Obtaining assistance or training from someone with the necessary

expertise.

Ensuring that there is adequate time available for performing the

relevant duties.

R230.4 If a threat to compliance with the principle of professional competence and

due care cannot be addressed, a chartered accountant shall determine

whether to decline to perform the duties in question. If the accountant

determines that declining is appropriate, the accountant shall communicate

the reasons.


230.5 A1 The requirements and application material in Section 270 apply when a

chartered accountant is pressured to act in a manner that might lead to a

breach of the principle of professional competence and due care.



SECTION 240

FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES LINKED TO

FINANCIAL REPORTING AND DECISION MAKING

Introduction




240.2 Having a financial interest, or knowing of a financial interest held by an

immediate or close family member might create a self-interest threat to

compliance with the principles of objectivity or confidentiality. This section

sets out specific requirements and application material relevant to applying

the conceptual framework in such circumstances.


General

R240.3 A chartered accountant shall not manipulate information or use confidential

information for personal gain or for the financial gain of others.

240.3 A1 Chartered accountants might have financial interests or might know of

financial interests of immediate or close family members that, in certain

circumstances, might create threats to compliance with the fundamental

principles. Financial interests include those arising from compensation or

incentive arrangements linked to financial reporting and decision making.

240.3 A2 Examples of circumstances that might create a self-interest threat include

situations in which the chartered accountant or an immediate or close family

member:

Has a motive and opportunity to manipulate price-sensitive

information in order to gain financially.

Holds a direct or indirect financial interest in the employing

organization and the value of that financial interest might be directly

affected by decisions made by the accountant.

Is eligible for a profit-related bonus and the value of that bonus

might be directly affected by decisions made by the accountant.

Holds, directly or indirectly, deferred bonus share rights or share

options in the employing organization, the value of which might be

affected by decisions made by the accountant.



Participates in compensation arrangements which provide incentives

to achieve targets or to support efforts to maximize the value of the

employing organization’s shares. An example of such an

arrangement might be through participation in incentive plans which

are linked to certain performance conditions being met.


The significance of the financial interest. What constitutes a

significant financial interest will depend on personal circumstances

and the materiality of the financial interest to the individual.

Policies and procedures for a committee independent of

management to determine the level or form of senior management

remuneration.

In accordance with any internal policies, disclosure to those charged

with governance of:

o All relevant interests.

o Any plans to exercise entitlements or trade in relevant shares.

Internal and external audit procedures that are specific to address

issues that give rise to the financial interest.

240.3 A4 Threats created by compensation or incentive arrangements might be

compounded by explicit or implicit pressure from superiors or colleagues.

See Section 270, Pressure to Breach the Fundamental Principles.



SECTION 250

INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY

Introduction




250.2 Offering or accepting inducements might create a self-interest, familiarity

or intimidation threat to compliance with the fundamental principles,

particularly the principles of integrity, objectivity and professional

behavior.

250.3 This section sets out requirements and application material relevant to

applying the conceptual framework in relation to the offering and accepting

of inducements when undertaking professional activities that does not

constitute non-compliance with laws and regulations. This section also

requires a chartered accountant to comply with relevant laws and

regulations when offering or accepting inducements.


General

250.4 A1 An inducement is an object, situation, or action that is used as a means to

influence another individual’s behavior, but not necessarily with the intent

to improperly influence that individual’s behavior. Inducements can range

from minor acts of hospitality between business colleagues to acts that result

in non-compliance with laws and regulations. An inducement can take many

different forms, for example:

Gifts.

Hospitality.

Entertainment.

Political or charitable donations.

Appeals to friendship and loyalty.

Employment or other commercial opportunities.

Preferential treatment, rights or privileges.



Inducements Prohibited by Laws and Regulations

R250.5 In many jurisdictions, there are laws and regulations, such as those related

to bribery and corruption, that prohibit the offering or accepting of

inducements in certain circumstances. The chartered accountant shall obtain

an understanding of relevant laws and regulations and comply with them

when the accountant encounters such circumstances.

Inducements Not Prohibited by Laws and Regulations

250.6 A1 The offering or accepting of inducements that is not prohibited by laws and

regulations might still create threats to compliance with the fundamental

principles.

Inducements with Intent to Improperly Influence Behavior

R250.7 A chartered accountant shall not offer, or encourage others to offer, any

inducement that is made, or which the accountant considers a reasonable and

informed third party would be likely to conclude is made, with the intent to

improperly influence the behavior of the recipient or of another individual.

R250.8 A chartered accountant shall not accept, or encourage others to accept, any

inducement that the accountant concludes is made, or considers a reasonable

and informed third party would be likely to conclude is made, with the intent

to improperly influence the behavior of the recipient or of another

individual.

250.9 A1 An inducement is considered as improperly influencing an individual’s

behavior if it causes the individual to act in an unethical manner. Such

improper influence can be directed either towards the recipient or towards

another individual who has some relationship with the recipient. The

fundamental principles are an appropriate frame of reference for a chartered

accountant in considering what constitutes unethical behavior on the part of

the accountant and, if necessary by analogy, other individuals.

250.9 A2 A breach of the fundamental principle of integrity arises when a chartered

accountant offers or accepts, or encourages others to offer or accept, an

inducement where the intent is to improperly influence the behavior of the

recipient or of another individual.

250.9 A3 The determination of whether there is actual or perceived intent to

improperly influence behavior requires the exercise of professional

judgment. Relevant factors to consider might include:

The nature, frequency, value and cumulative effect of the

inducement.



Timing of when the inducement is offered relative to any action or

decision that it might influence.

Whether the inducement is a customary or cultural practice in the

circumstances, for example, offering a gift on the occasion of a

religious holiday or wedding.

Whether the inducement is an ancillary part of a professional

activity, for example, offering or accepting lunch in connection with

a business meeting.

Whether the offer of the inducement is limited to an individual

recipient or available to a broader group. The broader group might

be internal or external to the employing organization, such as other

customers or vendors.

The roles and positions of the individuals offering or being offered

the inducement.

Whether the chartered accountant knows, or has reason to believe,

that accepting the inducement would breach the policies and

procedures of the counterparty’s employing organization.

The degree of transparency with which the inducement is offered.

Whether the inducement was required or requested by the recipient.

The known previous behavior or reputation of the offeror.

Consideration of Further Actions

250.10 A1 If the chartered accountant becomes aware of an inducement offered with

actual or perceived intent to improperly influence behavior, threats to

compliance with the fundamental principles might still be created even if the

requirements in paragraphs R250.7 and R250.8 are met.

250.10 A2 Examples of actions that might be safeguards to address such threats include:

Informing senior management or those charged with governance of

the employing organization of the chartered accountant or the

offeror regarding the offer.

Amending or terminating the business relationship with the offeror.



Inducements with No Intent to Improperly Influence Behavior

250.11 A1 The requirements and application material set out in the conceptual

framework apply when a chartered accountant has concluded there is no

actual or perceived intent to improperly influence the behavior of the


250.11 A2 If such an inducement is trivial and inconsequential, any threats created will

be at an acceptable level.

250.11 A3 Examples of circumstances where offering or accepting such an inducement

might create threats even if the chartered accountant has concluded there is

no actual or perceived intent to improperly influence behavior include:

Self-interest threats

o A chartered accountant is offered part-time employment by a

vendor.

Familiarity threats

o A chartered accountant regularly takes a customer or supplier

to sporting events.

Intimidation threats

o A chartered accountant accepts hospitality, the nature of which

could be perceived to be inappropriate were it to be publicly

disclosed.

250.11 A4 Relevant factors in evaluating the level of such threats created by offering

or accepting such an inducement include the same factors set out in

paragraph 250.9 A3 for determining intent.

250.11 A5 Examples of actions that might eliminate threats created by offering or

accepting such an inducement include:

Declining or not offering the inducement.

Transferring responsibility for any business-related decision

involving the counterparty to another individual who the chartered

accountant has no reason to believe would be, or would be perceived

to be, improperly influenced in making the decision.

250.11 A6 Examples of actions that might be safeguards to address such threats created

by offering or accepting such an inducement include:



Being transparent with senior management or those charged with

governance of the employing organization of the chartered

accountant or of the counterparty about offering or accepting an

inducement.

Registering the inducement in a log maintained by the employing

organization of the accountant or the counterparty.

Having an appropriate reviewer, who is not otherwise involved in

undertaking the professional activity, review any work performed or

decisions made by the accountant with respect to the individual or

organization from which the accountant accepted the inducement.

Donating the inducement to charity after receipt and appropriately

disclosing the donation, for example, to those charged with

governance or the individual who offered the inducement.

Reimbursing the cost of the inducement, such as hospitality,

received.

As soon as possible, returning the inducement, such as a gift, after it

was initially accepted.

Immediate or Close Family Members

R250.12 A chartered accountant shall remain alert to potential threats to the

accountant’s compliance with the fundamental principles created by the

offering of an inducement:

(a) By an immediate or close family member of the accountant to a

counterparty with whom the accountant has a professional

relationship; or

(b) To an immediate or close family member of the accountant by a

counterparty with whom the accountant has a professional

relationship.

R250.13 Where the chartered accountant becomes aware of an inducement being

offered to or made by an immediate or close family member and concludes

there is intent to improperly influence the behavior of the accountant or of

the counterparty, or considers a reasonable and informed third party would

be likely to conclude such intent exists, the accountant shall advise the

immediate or close family member not to offer or accept the inducement.



250.13 A1 The factors set out in paragraph 250.9 A3 are relevant in determining

whether there is actual or perceived intent to improperly influence the

behavior of the chartered accountant or of the counterparty. Another factor

that is relevant is the nature or closeness of the relationship, between:

(a) The accountant and the immediate or close family member;

(b) The immediate or close family member and the counterparty; and

(c) The accountant and the counterparty.

For example, the offer of employment, outside of the normal recruitment

process, to the spouse of the accountant by a counterparty with whom the

accountant is negotiating a significant contract might indicate such intent.

250.13 A2 The application material in paragraph 250.10 A2 is also relevant in

addressing threats that might be created when there is actual or perceived

intent to improperly influence the behavior of the chartered accountant or of

the counterparty even if the immediate or close family member has followed

the advice given pursuant to paragraph R250.13.

Application of the Conceptual Framework

250.14 A1 Where the chartered accountant becomes aware of an inducement offered in

the circumstances addressed in paragraph R250.12, threats to compliance

with the fundamental principles might be created where:

(a) The immediate or close family member offers or accepts the

inducement contrary to the advice of the accountant pursuant to

paragraph R250.13; or

(b) The accountant does not have reason to believe an actual or

perceived intent to improperly influence the behavior of the

accountant or of the counterparty exists.

250.14 A2 The application material in paragraphs 250.11 A1 to 250.11 A6 is relevant

for the purposes of identifying, evaluating and addressing such threats.

Factors that are relevant in evaluating the level of threats in these

circumstances also include the nature or closeness of the relationships set

out in paragraph 250.13 A1.




250.15 A1 If a chartered accountant is offered an inducement by the employing

organization relating to financial interests, compensation and incentives

linked to performance, the requirements and application material set out in

Section 240 apply.

250.15 A2 If a chartered accountant encounters or is made aware of inducements that

might result in non-compliance or suspected non-compliance with laws and

regulations by other individuals working for or under the direction of the

employing organization, the requirements and application material set out in

Section 260 apply.

250.15 A3 If a chartered accountant faces pressure to offer or accept inducements that

might create threats to compliance with the fundamental principles, the

requirements and application material set out in Section 270 apply.



SECTION 260

RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS

Introduction




260.2 A self-interest or intimidation threat to compliance with the principles of

integrity and professional behavior is created when a chartered accountant

becomes aware of non-compliance or suspected non-compliance with laws

and regulations.

260.3 A chartered accountant might encounter or be made aware of non-

compliance or suspected non-compliance in the course of carrying out

professional activities. This section guides the accountant in assessing the

implications of the matter and the possible courses of action when

responding to non-compliance or suspected non-compliance with:

(a) Laws and regulations generally recognized to have a direct effect on

the determination of material amounts and disclosures in the

employing organization’s financial statements; and

(b) Other laws and regulations that do not have a direct effect on the

determination of the amounts and disclosures in the employing

organization’s financial statements, but compliance with which

might be fundamental to the operating aspects of the employing

organization’s business, to its ability to continue its business, or to

avoid material penalties.

Objectives of the Chartered Accountant in Relation to Non-compliance with Laws

and Regulations

260.4 A distinguishing mark of the accountancy profession is its acceptance of the

responsibility to act in the public interest. When responding to non-

compliance or suspected non-compliance, the objectives of the chartered

accountant are:

(a) To comply with the principles of integrity and professional behavior;

(b) By alerting management or, where appropriate, those charged with

governance of the employing organization, to seek to:

(i) Enable them to rectify, remediate or mitigate the consequences

of the identified or suspected non-compliance; or



(ii) Deter the non-compliance where it has not yet occurred; and

(c) To take such further action as appropriate in the public interest.


General

260.5 A1 Non-compliance with laws and regulations (“non-compliance”) comprises

acts of omission or commission, intentional or unintentional, which are

contrary to the prevailing laws or regulations committed by the following

parties:

(a) The chartered accountant’s employing organization;

(b) Those charged with governance of the employing organization;

(c) Management of the employing organization; or

(d) Other individuals working for or under the direction of the

employing organization.

260.5 A2 Examples of laws and regulations which this section addresses include those

that deal with:

Fraud, corruption and bribery.

Money laundering, terrorist financing and proceeds of crime.

Securities markets and trading.

Banking and other financial products and services.

Data protection.

Tax and pension liabilities and payments.

Environmental protection.

Public health and safety.

260.5 A3 Non-compliance might result in fines, litigation or other consequences for

the employing organization, potentially materially affecting its financial

statements. Importantly, such non-compliance might have wider public

interest implications in terms of potentially substantial harm to investors,

creditors, employees or the general public. For the purposes of this section,

non-compliance that causes substantial harm is one that results in serious



adverse consequences to any of these parties in financial or non-financial

terms. Examples include the perpetration of a fraud resulting in significant

financial losses to investors, and breaches of environmental laws and

regulations endangering the health or safety of employees or the public.

R260.6 In some jurisdictions, there are legal or regulatory provisions governing how

chartered accountants are required to address non-compliance or suspected

non-compliance. These legal or regulatory provisions might differ from or

go beyond the provisions in this section. When encountering such non-

compliance or suspected non-compliance, the accountant shall obtain an

understanding of those legal or regulatory provisions and comply with them,

including:

(a) Any requirement to report the matter to an appropriate authority; and

(b) Any prohibition on alerting the relevant party.

260.6 A1 A prohibition on alerting the relevant party might arise, for example,

pursuant to anti-money laundering legislation.

260.7 A1 This section applies regardless of the nature of the employing organization,

including whether or not it is a public interest entity.

260.7 A2 A chartered accountant who encounters or is made aware of matters that are

clearly inconsequential is not required to comply with this section. Whether

a matter is clearly inconsequential is to be judged with respect to its nature

and its impact, financial or otherwise, on the employing organization, its

stakeholders and the general public.

260.7 A3 This section does not address:

(a) Personal misconduct unrelated to the business activities of the

employing organization; and

(b) Non-compliance by parties other than those specified in paragraph

260.5 A1.

The chartered accountant might nevertheless find the guidance in this

section helpful in considering how to respond in these situations.

Responsibilities of the Employing Organization’s Management and Those Charged

with Governance

260.8 A1 The employing organization’s management, with the oversight of those

charged with governance, is responsible for ensuring that the employing

organization’s business activities are conducted in accordance with laws and

regulations. Management and those charged with governance are also

responsible for identifying and addressing any non-compliance by:



(a) The employing organization;

(b) An individual charged with governance of the employing

organization;

(c) A member of management; or



Responsibilities of All Chartered Accountants

R260.9 If protocols and procedures exist within the chartered accountant’s

employing organization to address non-compliance or suspected non-

compliance, the accountant shall consider them in determining how to

respond to such non-compliance.

260.9 A1 Many employing organizations have established protocols and procedures

regarding how to raise non-compliance or suspected non-compliance

internally. These protocols and procedures include, for example, an ethics

policy or internal whistle-blowing mechanism. Such protocols and

procedures might allow matters to be reported anonymously through

designated channels.

R260.10 Where a chartered accountant becomes aware of a matter to which this

section applies, the steps that the accountant takes to comply with this

section shall be taken on a timely basis. For the purpose of taking timely

steps, the accountant shall have regard to the nature of the matter and the

potential harm to the interests of the employing organization, investors,

creditors, employees or the general public.

Responsibilities of Senior Chartered Accountants in Business

260.11 A1 Senior chartered accountants in business (“senior chartered accountants”)

are directors, officers or senior employees able to exert significant influence

over, and make decisions regarding, the acquisition, deployment and control

of the employing organization’s human, financial, technological, physical

and intangible resources. There is a greater expectation for such individuals

to take whatever action is appropriate in the public interest to respond to

non-compliance or suspected non-compliance than other chartered

accountants within the employing organization. This is because of senior

chartered accountants’ roles, positions and spheres of influence within the




Obtaining an Understanding of the Matter

R260.12 If, in the course of carrying out professional activities, a senior chartered

accountant becomes aware of information concerning non-compliance or

suspected non-compliance, the accountant shall obtain an understanding of

the matter. This understanding shall include:

(a) The nature of the non-compliance or suspected non-compliance and

the circumstances in which it has occurred or might occur;

(b) The application of the relevant laws and regulations to the

circumstances; and

(c) An assessment of the potential consequences to the employing

organization, investors, creditors, employees or the wider public.

260.12 A1 A senior chartered accountant is expected to apply knowledge and expertise,

and exercise professional judgment. However, the accountant is not

expected to have a level of understanding of laws and regulations greater

than that which is required for the accountant’s role within the employing

organization. Whether an act constitutes non-compliance is ultimately a

matter to be determined by a court or other appropriate adjudicative body.

260.12 A2 Depending on the nature and significance of the matter, the senior chartered

accountant might cause, or take appropriate steps to cause, the matter to be

investigated internally. The accountant might also consult on a confidential

basis with others within the employing organization or a professional body,

or with legal counsel.

Addressing the Matter

R260.13 If the senior chartered accountant identifies or suspects that non-compliance

has occurred or might occur, the accountant shall, subject to paragraph

R260.9, discuss the matter with the accountant’s immediate superior, if any.

If the accountant’s immediate superior appears to be involved in the matter,

the accountant shall discuss the matter with the next higher level of authority

within the employing organization.

260.13 A1 The purpose of the discussion is to enable a determination to be made as to

how to address the matter.

R260.14 The senior chartered accountant shall also take appropriate steps to:

(a) Have the matter communicated to those charged with governance;

(b) Comply with applicable laws and regulations, including legal or

regulatory provisions governing the reporting of non-compliance or

suspected non-compliance to an appropriate authority;



(c) Have the consequences of the non-compliance or suspected non-

compliance rectified, remediated or mitigated;

(d) Reduce the risk of re-occurrence; and

(e) Seek to deter the commission of the non-compliance if it has not

yet occurred.

260.14 A1 The purpose of communicating the matter to those charged with governance

is to obtain their concurrence regarding appropriate actions to take to

respond to the matter and to enable them to fulfill their responsibilities.

260.14 A2 Some laws and regulations might stipulate a period within which reports of

non-compliance or suspected non-compliance are to be made to an

appropriate authority.

R260.15 In addition to responding to the matter in accordance with the provisions of

this section, the senior chartered accountant shall determine whether

disclosure of the matter to the employing organization’s external auditor, if

any, is needed.

260.15 A1 Such disclosure would be pursuant to the senior chartered accountant’s duty

or legal obligation to provide all information necessary to enable the auditor

to perform the audit.

Determining Whether Further Action Is Needed

R260.16 The senior chartered accountant shall assess the appropriateness of the

response of the accountant’s superiors, if any, and those charged with

governance.

260.16 A1 Relevant factors to consider in assessing the appropriateness of the response

of the senior chartered accountant’s superiors, if any, and those charged with

governance include whether:

The response is timely.

They have taken or authorized appropriate action to seek to rectify,

remediate or mitigate the consequences of the non-compliance, or to

avert the non-compliance if it has not yet occurred.

The matter has been disclosed to an appropriate authority where

appropriate and, if so, whether the disclosure appears adequate.

R260.17 In light of the response of the senior chartered accountant’s superiors, if any,

and those charged with governance, the accountant shall determine if further

action is needed in the public interest.



260.17 A1 The determination of whether further action is needed, and the nature and

extent of it, will depend on various factors, including:

The legal and regulatory framework.

The urgency of the situation.

The pervasiveness of the matter throughout the employing

organization.

Whether the senior chartered accountant continues to have

confidence in the integrity of the accountant’s superiors and those

charged with governance.

Whether the non-compliance or suspected non-compliance is likely

to recur.

Whether there is credible evidence of actual or potential substantial

harm to the interests of the employing organization, investors,

creditors, employees or the general public.

260.17 A2 Examples of circumstances that might cause the senior chartered accountant

no longer to have confidence in the integrity of the accountant’s superiors

and those charged with governance include situations where:

The accountant suspects or has evidence of their involvement or

intended involvement in any non-compliance.

Contrary to legal or regulatory requirements, they have not reported,

or authorized the reporting of, the matter to an appropriate authority

within a reasonable period.

R260.18 The senior chartered accountant shall exercise professional judgment in

determining the need for, and nature and extent of, further action. In making

this determination, the accountant shall take into account whether a

reasonable and informed third party would be likely to conclude that the

accountant has acted appropriately in the public interest.

260.18 A1 Further action that the senior chartered accountant might take includes:

Informing the management of the parent entity of the matter if the

employing organization is a member of a group.

Disclosing the matter to an appropriate authority even when there is

no legal or regulatory requirement to do so.

Resigning from the employing organization.



260.18 A2 Resigning from the employing organization is not a substitute for taking

other actions that might be needed to achieve the senior chartered

accountant’s objectives under this section. In some jurisdictions, however,

there might be limitations as to the further actions available to the

accountant. In such circumstances, resignation might be the only available

course of action.

Seeking Advice

260.19 A1 As assessment of the matter might involve complex analysis and judgments,

the senior chartered accountant might consider:

Consulting internally.

Obtaining legal advice to understand the accountant’s options and

the professional or legal implications of taking any particular course

of action.

Consulting on a confidential basis with a regulatory or professional

body.

Determining Whether to Disclose the Matter to an Appropriate Authority

260.20 A1 Disclosure of the matter to an appropriate authority would be precluded if

doing so would be contrary to law or regulation. Otherwise, the purpose of

making disclosure is to enable an appropriate authority to cause the matter

to be investigated and action to be taken in the public interest.

260.20 A2 The determination of whether to make such a disclosure depends in

particular on the nature and extent of the actual or potential harm that is or

might be caused by the matter to investors, creditors, employees or the

general public. For example, the senior chartered accountant might

determine that disclosure of the matter to an appropriate authority is an

appropriate course of action if:

The employing organization is engaged in bribery (for example, of

local or foreign government officials for purposes of securing large

contracts).

The employing organization is regulated and the matter is of such

significance as to threaten its license to operate.

The employing organization is listed on a securities exchange and

the matter might result in adverse consequences to the fair and

orderly market in the employing organization’s securities or pose a

systemic risk to the financial markets.



It is likely that the employing organization would sell products that

are harmful to public health or safety.

The employing organization is promoting a scheme to its clients to

assist them in evading taxes.

260.20 A3 The determination of whether to make such a disclosure will also depend on

external factors such as:

Whether there is an appropriate authority that is able to receive the

information, and cause the matter to be investigated and action to be

taken. The appropriate authority will depend upon the nature of the

matter. For example, the appropriate authority would be a securities

regulator in the case of fraudulent financial reporting or an

environmental protection agency in the case of a breach of

environmental laws and regulations.

Whether there exists robust and credible protection from civil,

criminal or professional liability or retaliation afforded by

legislation or regulation, such as under whistle-blowing legislation

or regulation.

Whether there are actual or potential threats to the physical safety of

the senior chartered accountant or other individuals.

R260.21 If the senior chartered accountant determines that disclosure of the matter to

an appropriate authority is an appropriate course of action in the

circumstances, that disclosure is permitted pursuant to paragraph R114.1(d)

of the Code. When making such disclosure, the accountant shall act in good

faith and exercise caution when making statements and assertions.

Imminent Breach

R260.22 In exceptional circumstances, the senior chartered accountant might become

aware of actual or intended conduct that the accountant has reason to believe

would constitute an imminent breach of a law or regulation that would cause

substantial harm to investors, creditors, employees or the general public.

Having first considered whether it would be appropriate to discuss the matter

with management or those charged with governance of the employing

organization, the accountant shall exercise professional judgment and

determine whether to disclose the matter immediately to an appropriate

authority in order to prevent or mitigate the consequences of such imminent

breach. If disclosure is made, that disclosure is permitted pursuant to

paragraph R114.1(d) of the Code.



Documentation

260.23 A1 In relation to non-compliance or suspected non-compliance that falls within

the scope of this section, the senior chartered accountant is encouraged to

have the following matters documented:

The matter.

The results of discussions with the accountant’s superiors, if any,

and those charged with governance and other parties.

How the accountant’s superiors, if any, and those charged with

governance have responded to the matter.

The courses of action the accountant considered, the judgments

made and the decisions that were taken.

How the accountant is satisfied that the accountant has fulfilled the

responsibility set out in paragraph R260.17.

Responsibilities of Chartered Accountants Other than Senior Chartered Accountants

R260.24 If, in the course of carrying out professional activities, a chartered

accountant becomes aware of information concerning non-compliance or

suspected non-compliance, the accountant shall seek to obtain an

understanding of the matter. This understanding shall include the nature of

the non-compliance or suspected non-compliance and the circumstances in

which it has occurred or might occur.

260.24 A1 The chartered accountant is expected to apply knowledge and expertise, and

exercise professional judgment. However, the accountant is not expected to

have a level of understanding of laws and regulations greater than that which

is required for the accountant’s role within the employing organization.

Whether an act constitutes non-compliance is ultimately a matter to be

determined by a court or other appropriate adjudicative body.

260.24 A2 Depending on the nature and significance of the matter, the chartered

accountant might consult on a confidential basis with others within the

employing organization or a professional body, or with legal counsel.

R260.25 If the chartered accountant identifies or suspects that non-compliance has

occurred or might occur, the accountant shall, subject to paragraph R260.9,

inform an immediate superior to enable the superior to take appropriate

action. If the accountant’s immediate superior appears to be involved in the

matter, the accountant shall inform the next higher level of authority within

the employing organization.



R260.26 In exceptional circumstances, the chartered accountant may determine that

disclosure of the matter to an appropriate authority is an appropriate course

of action. If the accountant does so pursuant to paragraphs 260.20 A2 and

A3, that disclosure is permitted pursuant to paragraph R114.1(d) of the

Code. When making such disclosure, the accountant shall act in good faith

and exercise caution when making statements and assertions.

Documentation


the scope of this section, the chartered accountant is encouraged to have the

following matters documented:

The matter.

The results of discussions with the accountant’s superior,

management and, where applicable, those charged with governance

and other parties.

How the accountant’s superior has responded to the matter.





SECTION 270

PRESSURE TO BREACH THE FUNDAMENTAL PRINCIPLES

Introduction




270.2 Pressure exerted on, or by, a chartered accountant might create an

intimidation or other threat to compliance with one or more of the

fundamental principles. This section sets out specific requirements and

application material relevant to applying the conceptual framework in such

circumstances.


General

R270.3 A chartered accountant shall not:

(a) Allow pressure from others to result in a breach of compliance with

the fundamental principles; or

(b) Place pressure on others that the accountant knows, or has reason to

believe, would result in the other individuals breaching the

fundamental principles.

270.3 A1 A chartered accountant might face pressure that creates threats to

compliance with the fundamental principles, for example an intimidation

threat, when undertaking a professional activity. Pressure might be explicit

or implicit and might come from:

Within the employing organization, for example, from a colleague

or superior.

An external individual or organization such as a vendor, customer

or lender.

Internal or external targets and expectations.

270.3 A2 Examples of pressure that might result in threats to compliance with the

fundamental principles include:



Pressure related to conflicts of interest:

o Pressure from a family member bidding to act as a vendor to the

chartered accountant’s employing organization to select the

family member over another prospective vendor.

See also Section 210, Conflicts of Interest.

Pressure to influence preparation or presentation of information:

o Pressure to report misleading financial results to meet investor,

analyst or lender expectations.

o Pressure from elected officials on public sector accountants to

misrepresent programs or projects to voters.

o Pressure from colleagues to misstate income, expenditure or

rates of return to bias decision-making on capital projects and

acquisitions.

o Pressure from superiors to approve or process expenditures that

are not legitimate business expenses.

o Pressure to suppress internal audit reports containing adverse

findings.

See also Section 220, Preparation and Presentation of Information.

Pressure to act without sufficient expertise or due care:

o Pressure from superiors to inappropriately reduce the extent of

work performed.

o Pressure from superiors to perform a task without sufficient

skills or training or within unrealistic deadlines.

See also Section 230, Acting with Sufficient Expertise.

Pressure related to financial interests:

o Pressure from superiors, colleagues or others, for example,

those who might benefit from participation in compensation or

incentive arrangements to manipulate performance indicators.

See also Section 240, Financial Interests, Compensation and

Incentives Linked to Financial Reporting and Decision Making.



Pressure related to inducements:

o Pressure from others, either internal or external to the

employing organization, to offer inducements to influence

inappropriately the judgment or decision making process of an

individual or organization.

o Pressure from colleagues to accept a bribe or other inducement,

for example to accept inappropriate gifts or entertainment from

potential vendors in a bidding process.

See also Section 250, Inducements, Including Gifts and Hospitality.

Pressure related to non-compliance with laws and regulations:

o Pressure to structure a transaction to evade tax.

See also Section 260, Responding to Non-compliance with Laws and

Regulations.

270.3 A3 Factors that are relevant in evaluating the level of threats created by pressure

include:

The intent of the individual who is exerting the pressure and the

nature and extent of the pressure.

The application of laws, regulations, and professional standards to

the circumstances.

The culture and leadership of the employing organization including

the extent to which they reflect or emphasize the importance of

ethical behavior and the expectation that employees will act

ethically. For example, a corporate culture that tolerates unethical

behavior might increase the likelihood that the pressure would result

in a threat to compliance with the fundamental principles.

Policies and procedures, if any, that the employing organization has

established, such as ethics or human resources policies that address

pressure.

270.3 A4 Discussing the circumstances creating the pressure and consulting with

others about those circumstances might assist the chartered accountant to

evaluate the level of the threat. Such discussion and consultation, which

requires being alert to the principle of confidentiality, might include:

Discussing the matter with the individual who is exerting the

pressure to seek to resolve it.



Discussing the matter with the accountant’s superior, if the superior

is not the individual exerting the pressure.

Escalating the matter within the employing organization, including

when appropriate, explaining any consequential risks to the

organization, for example with:

o Higher levels of management.

o Internal or external auditors.

o Those charged with governance.

Disclosing the matter in line with the employing organization’s

policies, including ethics and whistleblowing policies, using any

established mechanism, such as a confidential ethics hotline.

Consulting with:

o A colleague, superior, human resources personnel, or another

chartered accountant;

o Relevant professional or regulatory bodies or industry

associations; or

o Legal counsel.

270.3 A5 An example of an action that might eliminate threats created by pressure is

the chartered accountant’s request for a restructure of, or segregation of,

certain responsibilities and duties so that the accountant is no longer

involved with the individual or entity exerting the pressure.

Documentation

270.4 A1 The chartered accountant is encouraged to document:

The facts.

The communications and parties with whom these matters were

discussed.

The courses of action considered.

How the matter was addressed.


Page 68 of 263 INDEX OF PART 3

PART 3 - CHARTERED ACCOUNTANTS IN PRACTICE

Section 300 Applying the Conceptual Framework – Chartered Accountants in

Practice .................................................................................................. 69

Section 310 Conflicts of Interest ............................................................................... 77

Section 320 Professional Appointments .................................................................... 84

Section 321 Second Opinions .................................................................................... 89

Section 330 Fees and Other Types of Remuneration ................................................. 90

Section 340 Inducements, Including Gifts and Hospitality ....................................... 92

Section 350 Custody of Client Assets ........................................................................ 99

Section 360 Responding to Non-Compliance with Laws and Regulations ............. 100

Section 370 Public Notices, Announcements and Communications Undue Publicity

be Avoided ........................................................................................... 117



PART 3 - CHARTERED ACCOUNTANTS IN PRACTICE

SECTION 300

APPLYING THE CONCEPTUAL FRAMEWORK – CHARTERED ACCOUNTANTS

IN PRACTICE

Introduction

300.1 This Part of the Code sets out requirements and application material for

chartered accountants in practice when applying the conceptual framework

set out in Section 120. It does not describe all of the facts and circumstances,

including professional activities, interests and relationships, that could be

encountered by chartered accountants in practice, which create or might

create threats to compliance with the fundamental principles. Therefore, the

conceptual framework requires chartered accountants in practice to be alert

for such facts and circumstances.

300.2 The requirements and application material that apply to chartered

accountants in practice are set out in:

Part 3 – Chartered Accountants in Practice, Sections 300 to 399,

which applies to all chartered accountants in practice, whether they

provide assurance services or not.

International Independence Standards as follows:

o Part 4A – Independence for Audit and Review Engagements,

Sections 400 to 899, which applies to chartered accountants in

practice when performing audit and review engagements.

o Part 4B – Independence for Assurance Engagements Other than

Audit and Review Engagements, Sections 900 to 999, which

applies to chartered accountants in practice when performing

assurance engagements other than audit or review engagements.

300.3 In this Part, the term “chartered accountant” refers to individual chartered

accountants in practice and their firms.


General

R300.4 A chartered accountant shall comply with the fundamental principles set out

in Section 110 and apply the conceptual framework set out in Section 120 to

identify, evaluate and address threats to compliance with the fundamental

principles.



R300.5 When dealing with an ethics issue, the chartered accountant shall consider

the context in which the issue has arisen or might arise. Where an individual

who is a chartered accountant in practice is performing professional

activities pursuant to the accountant’s relationship with the firm, whether as

a contractor, employee or owner, the individual shall comply with the

provisions in Part 2 that apply to these circumstances.

300.5 A1 Examples of situations in which the provisions in Part 2 apply to a chartered

accountant in practice include:

Facing a conflict of interest when being responsible for selecting a

vendor for the firm when an immediate family member of the

accountant might benefit financially from the contract. The

requirements and application material set out in Section 210 apply

in these circumstances.

Preparing or presenting financial information for the accountant’s

client or firm. The requirements and application material set out in

Section 220 apply in these circumstances.

Being offered an inducement such as being regularly offered

complimentary tickets to attend sporting events by a supplier of the

firm. The requirements and application material set out in Section

250 apply in these circumstances.

Facing pressure from an engagement partner to report chargeable

hours inaccurately for a client engagement. The requirements and

application material set out in Section 270 apply in these

circumstances.

Identifying Threats


a broad range of facts and circumstances. The categories of threats are

described in paragraph 120.6 A3. The following are examples of facts and

circumstances within each of those categories of threats that might create

threats for a chartered accountant when undertaking a professional service:

(a) Self-interest Threats

A chartered accountant having a direct financial interest in a

client.

A chartered accountant quoting a low fee to obtain a new

engagement and the fee is so low that it might be difficult to

perform the professional service in accordance with applicable

technical and professional standards for that price.



A chartered accountant having a close business relationship

with a client.

A chartered accountant having access to confidential

information that might be used for personal gain.

A chartered accountant discovering a significant error when

evaluating the results of a previous professional service

performed by a member of the accountant’s firm.

(b) Self-review Threats

A chartered accountant issuing an assurance report on the

effectiveness of the operation of financial systems after

implementing the systems.

A chartered accountant having prepared the original data used

to generate records that are the subject matter of the assurance

engagement.

(c) Advocacy Threats

A chartered accountant promoting the interests of, or shares in,

a client.

A chartered accountant acting as an advocate on behalf of a

client in litigation or disputes with third parties.

A chartered accountant lobbying in favor of legislation on

behalf of a client.

(d) Familiarity Threats

A chartered accountant having a close or immediate family

member who is a director or officer of the client.

A director or officer of the client, or an employee in a position

to exert significant influence over the subject matter of the

engagement, having recently served as the engagement partner.

An audit team member having a long association with the audit

client.



(e) Intimidation Threats

A chartered accountant being threatened with dismissal from a

client engagement or the firm because of a disagreement about

a professional matter.

A chartered accountant feeling pressured to agree with the

judgment of a client because the client has more expertise on

the matter in question.

A chartered accountant being informed that a planned

promotion will not occur unless the accountant agrees with an

inappropriate accounting treatment.

A chartered accountant having accepted a significant gift from

a client and being threatened that acceptance of this gift will be

made public.

Evaluating Threats

300.7 A1 The conditions, policies and procedures described in paragraph 120.6 A1

and 120.8 A2 might impact the evaluation of whether a threat to compliance

with the fundamental principles is at an acceptable level. Such conditions,

policies and procedures might relate to:

(a) The client and its operating environment; and

(b) The firm and its operating environment.

300.7 A2 The chartered accountant’s evaluation of the level of a threat is also impacted

by the nature and scope of the professional service.

The Client and its Operating Environment

300.7 A3 The chartered accountant’s evaluation of the level of a threat might be

impacted by whether the client is:

(a) An audit client and whether the audit client is a public interest entity;

(b) An assurance client that is not an audit client; or

(c) A non-assurance client.

For example, providing a non-assurance service to an audit client that is a

public interest entity might be perceived to result in a higher level of threat

to compliance with the principle of objectivity with respect to the audit.



300.7 A4 The corporate governance structure, including the leadership of a client

might promote compliance with the fundamental principles. Accordingly, a

chartered accountant’s evaluation of the level of a threat might also be

impacted by a client’s operating environment. For example:

The client requires appropriate individuals other than management

to ratify or approve the appointment of a firm to perform an

engagement.

The client has competent employees with experience and seniority

to make managerial decisions.

The client has implemented internal procedures that facilitate

objective choices in tendering non-assurance engagements.

The client has a corporate governance structure that provides

appropriate oversight and communications regarding the firm’s

services.

The Firm and its Operating Environment

300.7 A5 A chartered accountant’s evaluation of the level of a threat might be

impacted by the work environment within the accountant’s firm and its

operating environment. For example:

Leadership of the firm that promotes compliance with the

fundamental principles and establishes the expectation that

assurance team members will act in the public interest.

Policies or procedures for establishing and monitoring compliance

with the fundamental principles by all personnel.

Compensation, performance appraisal and disciplinary policies and

procedures that promote compliance with the fundamental

principles.

Management of the reliance on revenue received from a single

client.

The engagement partner having authority within the firm for

decisions concerning compliance with the fundamental principles,

including decisions about accepting or providing services to a client.

Educational, training and experience requirements.

Processes to facilitate and address internal and external concerns or

complaints.



Consideration of New Information or Changes in Facts and Circumstances

300.7 A6 New information or changes in facts and circumstances might:

(a) Impact the level of a threat; or

(b) Affect the chartered accountant’s conclusions about whether safeguards

applied continue to address identified threats as intended.

In these situations, actions that were already implemented as safeguards

might no longer be effective in addressing threats. Accordingly, the

application of the conceptual framework requires that the chartered

accountant re-evaluate and address the threats accordingly. (Ref: Paras.

R120.9 and R120.10).

300.7 A7 Examples of new information or changes in facts and circumstances that

might impact the level of a threat include:

When the scope of a professional service is expanded.

When the client becomes a listed entity or acquires another business

unit.

When the firm merges with another firm.

When the chartered accountant is jointly engaged by two clients and

a dispute emerges between the two clients.

When there is a change in the chartered accountant’s personal or

immediate family relationships.

Addressing Threats

300.8 A1 Paragraphs R120.10 to 120.10 A2 set out requirements and application

material for addressing threats that are not at an acceptable level.

Examples of Safeguards

300.8 A2 Safeguards vary depending on the facts and circumstances. Examples of

actions that in certain circumstances might be safeguards to address threats

include:

Assigning additional time and qualified personnel to required tasks

when an engagement has been accepted might address a self-interest

threat.



Having an appropriate reviewer who was not a member of the team

review the work performed or advise as necessary might address a

self-review threat.

Using different partners and engagement teams with separate

reporting lines for the provision of non-assurance services to an

assurance client might address self-review, advocacy or familiarity

threats.

Involving another firm to perform or re-perform part of the

engagement might address self-interest, self-review, advocacy,

familiarity or intimidation threats.

Disclosing to clients any referral fees or commission arrangements

received for recommending services or products might address a

self-interest threat.

Separating teams when dealing with matters of a confidential nature

might address a self-interest threat.

300.8 A3 The remaining sections of Part 3 and International Independence Standards

describe certain threats that might arise during the course of performing

professional services and include examples of actions that might address

threats.

Appropriate Reviewer

300.8 A4 An appropriate reviewer is a professional with the necessary knowledge,

skills, experience and authority to review, in an objective manner, the

relevant work performed or service provided. Such an individual might be a

chartered accountant.

Communicating with Those Charged with Governance

R300.9 When communicating with those charged with governance in accordance

with the Code, a chartered accountant shall determine the appropriate

individual(s) within the entity’s governance structure with whom to

communicate. If the accountant communicates with a subgroup of those

charged with governance, the accountant shall determine whether

communication with all of those charged with governance is also necessary

so that they are adequately informed.

300.9 A1 In determining with whom to communicate, a chartered accountant might

consider:

(a) The nature and importance of the circumstances; and

(b) The matter to be communicated.



300.9 A2 Examples of a subgroup of those charged with governance include an audit

committee or an individual member of those charged with governance.

R300.10 If a chartered accountant communicates with individuals who have

management responsibilities as well as governance responsibilities, the

accountant shall be satisfied that communication with those individuals

adequately informs all of those in a governance role with whom the

accountant would otherwise communicate.

300.10 A1 In some circumstances, all of those charged with governance are involved in

managing the entity, for example, a small business where a single owner

manages the entity and no one else has a governance role. In these cases, if

matters are communicated to individual(s) with management

responsibilities, and those individual(s) also have governance

responsibilities, the chartered accountant has satisfied the requirement to

communicate with those charged with governance.



SECTION 310

CONFLICTS OF INTEREST

Introduction




310.2 A conflict of interest creates threats to compliance with the principle of

objectivity and might create threats to compliance with the other

fundamental principles. Such threats might be created when:

(a) A chartered accountant provides a professional service related to a

particular matter for two or more clients whose interests with respect

to that matter are in conflict; or

(b) The interests of a chartered accountant with respect to a particular

matter and the interests of the client for whom the accountant

provides a professional service related to that matter are in conflict.

310.3 This section sets out specific requirements and application material relevant

to applying the conceptual framework to conflicts of interest. When a

chartered accountant provides an audit, review or other assurance service,

independence is also required in accordance with International

Independence Standards.


General

R310.4 A chartered accountant shall not allow a conflict of interest to compromise

professional or business judgment.

310.4 A1 Examples of circumstances that might create a conflict of interest include:

Providing a transaction advisory service to a client seeking to

acquire an audit client, where the firm has obtained confidential

information during the course of the audit that might be relevant to

the transaction.

Providing advice to two clients at the same time where the clients

are competing to acquire the same company and the advice might be

relevant to the parties’ competitive positions.



Providing services to a seller and a buyer in relation to the same

transaction.

Preparing valuations of assets for two parties who are in an

adversarial position with respect to the assets.

Representing two clients in the same matter who are in a legal

dispute with each other, such as during divorce proceedings, or the

dissolution of a partnership.

In relation to a license agreement, providing an assurance report for

a licensor on the royalties due while advising the licensee on the

amounts payable.

Advising a client to invest in a business in which, for example, the

spouse of the chartered accountant has a financial interest.

Providing strategic advice to a client on its competitive position

while having a joint venture or similar interest with a major

competitor of the client.

Advising a client on acquiring a business which the firm is also

interested in acquiring.

Advising a client on buying a product or service while having a

royalty or commission agreement with a potential seller of that

product or service.

Conflict Identification

General

R310.5 Before accepting a new client relationship, engagement, or business

relationship, a chartered accountant shall take reasonable steps to identify

circumstances that might create a conflict of interest, and therefore a threat

to compliance with one or more of the fundamental principles. Such steps

shall include identifying:

(a) The nature of the relevant interests and relationships between the

parties involved; and

(b) The service and its implication for relevant parties.

310.5 A1 An effective conflict identification process assists a chartered accountant

when taking reasonable steps to identify interests and relationships that

might create an actual or potential conflict of interest, both before

determining whether to accept an engagement and throughout the



engagement. Such a process includes considering matters identified by

external parties, for example clients or potential clients. The earlier an actual

or potential conflict of interest is identified, the greater the likelihood of the

accountant being able to address threats created by the conflict of interest.

310.5 A2 An effective process to identify actual or potential conflicts of interest will

take into account factors such as:

The nature of the professional services provided.

The size of the firm.

The size and nature of the client base.

The structure of the firm, for example, the number and geographic

location of offices.

310.5 A3 More information on client acceptance is set out in Section 320, Professional

Appointments.

Changes in Circumstances

R310.6 A chartered accountant shall remain alert to changes over time in the nature

of services, interests and relationships that might create a conflict of interest

while performing an engagement.

310.6 A1 The nature of services, interests and relationships might change during the

engagement. This is particularly true when a chartered accountant is asked

to conduct an engagement in a situation that might become adversarial, even

though the parties who engage the accountant initially might not be involved

in a dispute.

Network Firms

R310.7 If the firm is a member of a network, a chartered accountant shall consider

conflicts of interest that the accountant has reason to believe might exist or

arise due to interests and relationships of a network firm.

310.7 A1 Factors to consider when identifying interests and relationships involving a

network firm include:

The nature of the professional services provided.

The clients served by the network.

The geographic locations of all relevant parties.



Threats Created by Conflicts of Interest

310.8 A1 In general, the more direct the connection between the professional service

and the matter on which the parties’ interests conflict, the more likely the

level of the threat is not at an acceptable level.

310.8 A2 Factors that are relevant in evaluating the level of a threat created by a

conflict of interest include measures that prevent unauthorized disclosure of

confidential information when performing professional services related to a

particular matter for two or more clients whose interests with respect to that

matter are in conflict. These measures include:

The existence of separate practice areas for specialty functions

within the firm, which might act as a barrier to the passing of

confidential client information between practice areas.

Policies and procedures to limit access to client files.

Confidentiality agreements signed by personnel and partners of the

firm.

Separation of confidential information physically and electronically.

Specific and dedicated training and communication.

310.8 A3 Examples of actions that might be safeguards to address threats created by a

conflict of interest include:

Having separate engagement teams who are provided with clear

policies and procedures on maintaining confidentiality.

Having an appropriate reviewer, who is not involved in providing

the service or otherwise affected by the conflict, review the work

performed to assess whether the key judgments and conclusions are

appropriate.

Disclosure and Consent

General

R310.9 A chartered accountant shall exercise professional judgment to determine

whether the nature and significance of a conflict of interest are such that

specific disclosure and explicit consent are necessary when addressing the

threat created by the conflict of interest.

310.9 A1 Factors to consider when determining whether specific disclosure and

explicit consent are necessary include:



The circumstances creating the conflict of interest.

The parties that might be affected.

The nature of the issues that might arise.

The potential for the particular matter to develop in an unexpected

manner.

310.9 A2 Disclosure and consent might take different forms, for example:

General disclosure to clients of circumstances where, as is common

commercial practice, the chartered accountant does not provide

professional services exclusively to any one client (for example, in

a particular professional service and market sector). This enables the

client to provide general consent accordingly. For example, an

accountant might make general disclosure in the standard terms and

conditions for the engagement.

Specific disclosure to affected clients of the circumstances of the

particular conflict in sufficient detail to enable the client to make an

informed decision about the matter and to provide explicit consent

accordingly. Such disclosure might include a detailed presentation

of the circumstances and a comprehensive explanation of any

planned safeguards and the risks involved.

Consent might be implied by clients’ conduct in circumstances

where the chartered accountant has sufficient evidence to conclude

that clients know the circumstances at the outset and have accepted

the conflict of interest if they do not raise an objection to the

existence of the conflict.

310.9 A3 It is generally necessary:

(a) To disclose the nature of the conflict of interest and how any threats

created were addressed to clients affected by a conflict of interest;

and

(b) To obtain consent of the affected clients to perform the professional

services when safeguards are applied to address the threat.

310.9 A4 If such disclosure or consent is not in writing, the chartered accountant is

encouraged to document:

(a) The nature of the circumstances giving rise to the conflict of interest;

(b) The safeguards applied to address the threats when applicable; and

(c) The consent obtained.



When Explicit Consent is Refused

R310.10 If a chartered accountant has determined that explicit consent is necessary

in accordance with paragraph R310.9 and the client has refused to provide

consent, the accountant shall either:

(a) End or decline to perform professional services that would result in

the conflict of interest; or

(b) End relevant relationships or dispose of relevant interests to

eliminate the threat or reduce it to an acceptable level.

Confidentiality

General

R310.11 A chartered accountant shall remain alert to the principle of confidentiality,

including when making disclosures or sharing information within the firm

or network and seeking guidance from third parties.

310.11 A1 Subsection 114 sets out requirements and application material relevant to

situations that might create a threat to compliance with the principle of

confidentiality.

When Disclosure to Obtain Consent would Breach Confidentiality

R310.12 When making specific disclosure for the purpose of obtaining explicit

consent would result in a breach of confidentiality, and such consent cannot

therefore be obtained, the firm shall only accept or continue an engagement

if:

(a) The firm does not act in an advocacy role for one client in an

adversarial position against another client in the same matter;

(b) Specific measures are in place to prevent disclosure of confidential

information between the engagement teams serving the two clients;

and

(c) The firm is satisfied that a reasonable and informed third party

would be likely to conclude that it is appropriate for the firm to

accept or continue the engagement because a restriction on the

firm’s ability to provide the professional service would produce a

disproportionate adverse outcome for the clients or other relevant

third parties.



310.12 A1 A breach of confidentiality might arise, for example, when seeking consent

to perform:

A transaction-related service for a client in a hostile takeover of

another client of the firm.

A forensic investigation for a client regarding a suspected fraud,

where the firm has confidential information from its work for

another client who might be involved in the fraud.

Documentation

R310.13 In the circumstances set out in paragraph R310.12, the chartered accountant

shall document:

(a) The nature of the circumstances, including the role that the

accountant is to undertake;

(b) The specific measures in place to prevent disclosure of information

between the engagement teams serving the two clients; and

(c) Why it is appropriate to accept or continue the engagement.



SECTION 320

PROFESSIONAL APPOINTMENTS

Introduction




320.2 Acceptance of a new client relationship or changes in an existing

engagement might create a threat to compliance with one or more of the



circumstances.


Client and Engagement Acceptance

General

320.3 A1 Threats to compliance with the principles of integrity or professional

behavior might be created, for example, from questionable issues associated

with the client (its owners, management or activities). Issues that, if known,

might create such a threat include client involvement in illegal activities,

dishonesty, questionable financial reporting practices or other unethical

behavior.


Knowledge and understanding of the client, its owners, management

and those charged with governance and business activities.

The client’s commitment to address the questionable issues, for

example, through improving corporate governance practices or

internal controls.

320.3 A3 A self-interest threat to compliance with the principle of professional

competence and due care is created if the engagement team does not possess,

or cannot acquire, the competencies to perform the professional services.


An appropriate understanding of:

o The nature of the client’s business;



o The complexity of its operations;

o The requirements of the engagement; and

o The purpose, nature and scope of the work to be performed.

Knowledge of relevant industries or subject matter.

Experience with relevant regulatory or reporting requirements.

The existence of quality control policies and procedures designed to

provide reasonable assurance that engagements are accepted only

when they can be performed competently.

320.3 A5 Examples of actions that might be safeguards to address a self-interest threat

include:

Assigning sufficient engagement personnel with the necessary

competencies.

Agreeing on a realistic time frame for the performance of the

engagement.

Using experts where necessary.

Changes in a Professional Appointment

General

R320.4 A chartered accountant shall determine whether there are any reasons for not

accepting an engagement when the accountant:

(a) Is asked by a potential client to replace another accountant;

(b) Considers tendering for an engagement held by another accountant;

or

(c) Considers undertaking work that is complementary or additional to

that of another accountant.

320.4 A1 There might be reasons for not accepting an engagement. One such reason

might be if a threat created by the facts and circumstances cannot be

addressed by applying safeguards. For example, there might be a self-

interest threat to compliance with the principle of professional competence

and due care if a chartered accountant accepts the engagement before

knowing all the relevant facts.



320.4 A2 If a chartered accountant is asked to undertake work that is complementary

or additional to the work of an existing or predecessor accountant, a self-

interest threat to compliance with the principle of professional competence

and due care might be created, for example, as a result of incomplete

information.

320.4 A3 A factor that is relevant in evaluating the level of such a threat is whether

tenders state that, before accepting the engagement, contact with the existing

or predecessor accountant will be requested. This contact gives the proposed

accountant the opportunity to inquire whether there are any reasons why the

engagement should not be accepted.


threat include:

Asking the existing or predecessor accountant to provide any known

information of which, in the existing or predecessor accountant’s

opinion, the proposed accountant needs to be aware before deciding

whether to accept the engagement. For example, inquiry might

reveal previously undisclosed pertinent facts and might indicate

disagreements with the existing or predecessor accountant that

might influence the decision to accept the appointment.

Obtaining information from other sources such as through inquiries

of third parties or background investigations regarding senior

management or those charged with governance of the client.

Communicating with the Existing or Predecessor Accountant

320.5 A1 A proposed accountant will usually need the client’s permission, preferably

in writing, to initiate discussions with the existing or predecessor accountant.

R320.6 If unable to communicate with the existing or predecessor accountant, the

proposed accountant shall take other reasonable steps to obtain information

about any possible threats.

Communicating with the Proposed Accountant

R320.7 When an existing or predecessor accountant is asked to respond to a

communication from a proposed accountant, the existing or predecessor

accountant shall:

(a) Comply with relevant laws and regulations governing the request;

and

(b) Provide any information honestly and unambiguously.



320.7 A1 An existing or predecessor accountant is bound by confidentiality. Whether

the existing or predecessor accountant is permitted or required to discuss the

affairs of a client with a proposed accountant will depend on the nature of

the engagement and:

(a) Whether the existing or predecessor accountant has permission from

the client for the discussion; and

(b) The legal and ethics requirements relating to such communications

and disclosure, which might vary by jurisdiction.

320.7 A2 Circumstances where a chartered accountant is or might be required to

disclose confidential information, or when disclosure might be appropriate,

are set out in paragraph 114.1 A1 of the Code.

Changes in Audit or Review Appointments

R320.8 In the case of an audit or review of financial statements, a chartered

accountant shall request the existing or predecessor accountant to provide

known information regarding any facts or other information of which, in the

existing or predecessor accountant’s opinion, the proposed accountant needs

to be aware before deciding whether to accept the engagement. Except for

the circumstances involving non-compliance or suspected non-compliance

with laws and regulations set out in paragraphs R360.21 and R360.22:

(a) If the client consents to the existing or predecessor accountant

disclosing any such facts or other information, the existing or

predecessor accountant shall provide the information honestly and

unambiguously; and

(b) If the client fails or refuses to grant the existing or predecessor

accountant permission to discuss the client’s affairs with the

proposed accountant, the existing or predecessor accountant shall

disclose this fact to the proposed accountant, who shall carefully

consider such failure or refusal when determining whether to accept

the appointment.

Client and Engagement Continuance

R320.9 For a recurring client engagement, a chartered accountant shall periodically

review whether to continue with the engagement.

320.9 A1 Potential threats to compliance with the fundamental principles might be

created after acceptance which, had they been known earlier, would have

caused the chartered accountant to decline the engagement. For example, a

self-interest threat to compliance with the principle of integrity might be

created by improper earnings management or balance sheet valuations.



Using the Work of an Expert

R320.10 When a chartered accountant intends to use the work of an expert, the

accountant shall determine whether the use is warranted.

320.10 A1 Factors to consider when a chartered accountant intends to use the work of

an expert include the reputation and expertise of the expert, the resources

available to the expert, and the professional and ethics standards applicable

to the expert. This information might be gained from prior association with

the expert or from consulting others.



SECTION 321

SECOND OPINIONS

Introduction




321.2 Providing a second opinion to an entity that is not an existing client might

create a self-interest or other threat to compliance with one or more of the



circumstances.


General

321.3 A1 A chartered accountant might be asked to provide a second opinion on the

application of accounting, auditing, reporting or other standards or principles

to (a) specific circumstances, or (b) transactions by or on behalf of a

company or an entity that is not an existing client. A threat, for example, a

self-interest threat to compliance with the principle of professional

competence and due care, might be created if the second opinion is not based

on the same facts that the existing or predecessor accountant had, or is based

on inadequate evidence.

321.3 A2 A factor that is relevant in evaluating the level of such a self-interest threat

is the circumstances of the request and all the other available facts and

assumptions relevant to the expression of a professional judgment.


threat include:

With the client’s permission, obtaining information from the

existing or predecessor accountant.

Describing the limitations surrounding any opinion in

communications with the client.

Providing the existing or predecessor accountant with a copy of the

opinion.

When Permission to Communicate is Not Provided

R321.4 If an entity seeking a second opinion from a chartered accountant will not

permit the accountant to communicate with the existing or predecessor

accountant, the accountant shall determine whether the accountant may

provide the second opinion sought.



SECTION 330

FEES AND OTHER TYPES OF REMUNERATION

Introduction




330.2 The level and nature of fee and other remuneration arrangements might

create a self-interest threat to compliance with one or more of the

fundamental principles. This section sets out specific application material

relevant to applying the conceptual framework in such circumstances.

Application Material

Level of Fees

330.3 A1 The level of fees quoted might impact a chartered accountant’s ability to

perform professional services in accordance with professional standards.

R330.4 When entering into negotiations regarding professional services, a chartered

accountant in practice may quote whatever fee is deemed to be appropriate

commensurate with the nature and service to be rendered. However, in such

cases, chartered accountants in practice should be careful not to quote fee

lower than that charged by the chartered accountants in practice previously

carrying out the audit unless scope and quantum of work materially differs

from the scope and quantum of work carried out by the previous auditor, as

it could then be regarded as undercutting.


Whether the client is aware of the terms of the engagement and, in

particular, the basis on which fees are charged and which professional

services the quoted fee covers.

Whether the level of the fee is set by an independent third party such as

a regulatory body.


threat include:

Adjusting the level of fees or the scope of the engagement.

Having an appropriate reviewer review the work performed.



Referral Fees or Commissions

330.5 A1 A self-interest threat to compliance with the principles of objectivity and

professional competence and due care is created if a chartered accountant

pays or receives a referral fee or receives a commission relating to a client.

Such referral fees or commissions include, for example:

A fee paid to another chartered accountant for the purposes of

obtaining new client work when the client continues as a client of

the existing accountant but requires specialist services not offered

by that accountant.

A fee received for referring a continuing client to another chartered

accountant or other expert where the existing accountant does not

provide the specific professional service required by the client.

A commission received from a third party (for example, a software

vendor) in connection with the sale of goods or services to a client.


threat include:

Obtaining an advance agreement from the client for commission

arrangements in connection with the sale by another party of goods

or services to the client might address a self-interest threat.

Disclosing to clients any referral fees or commission arrangements

paid to, or received from, another chartered accountant or third party

for recommending services or products might address a self-interest

threat.

Purchase or Sale of a Firm

330.6 A1 A chartered accountant may purchase all or part of another firm on the basis

that payments will be made to individuals formerly owning the firm or to

their heirs or estates. Such payments are not referral fees or commissions for

the purposes of this section.



SECTION 340

INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY

Introduction




340.2 Offering or accepting inducements might create a self-interest, familiarity or

intimidation threat to compliance with the fundamental principles,

particularly the principles of integrity, objectivity and professional behavior.


applying the conceptual framework in relation to the offering and accepting

of inducements when performing professional services that does not

constitute non-compliance with laws and regulations. This section also

requires a chartered accountant to comply with relevant laws and regulations

when offering or accepting inducements.


General

340.4 A1 An inducement is an object, situation, or action that is used as a means to

influence another individual’s behavior, but not necessarily with the intent

to improperly influence that individual’s behavior. Inducements can range

from minor acts of hospitality between chartered accountants and existing

or prospective clients to acts that result in non-compliance with laws and

regulations. An inducement can take many different forms, for example:

Gifts.

Hospitality.

Entertainment.







Inducements Prohibited by Laws and Regulations

R340.5 In many jurisdictions, there are laws and regulations, such as those related

to bribery and corruption, that prohibit the offering or accepting of

inducements in certain circumstances. The chartered accountant shall obtain

an understanding of relevant laws and regulations and comply with them

when the accountant encounters such circumstances.

Inducements Not Prohibited by Laws and Regulations

340.6 A1 The offering or accepting of inducements that is not prohibited by laws and

regulations might still create threats to compliance with the fundamental

principles.

Inducements with Intent to Improperly Influence Behavior

R340.7 A chartered accountant shall not offer, or encourage others to offer, any

inducement that is made, or which the accountant considers a reasonable and

informed third party would be likely to conclude is made, with the intent to

improperly influence the behavior of the recipient or of another individual.

R340.8 A chartered accountant shall not accept, or encourage others to accept, any

inducement that the accountant concludes is made, or considers a reasonable

and informed third party would be likely to conclude is made, with the intent

to improperly influence the behavior of the recipient or of another

individual.

340.9 A1 An inducement is considered as improperly influencing an individual’s

behavior if it causes the individual to act in an unethical manner. Such

improper influence can be directed either towards the recipient or towards

another individual who has some relationship with the recipient. The

fundamental principles are an appropriate frame of reference for a chartered

accountant in considering what constitutes unethical behavior on the part of

the accountant and, if necessary by analogy, other individuals.

340.9 A2 A breach of the fundamental principle of integrity arises when a chartered

accountant offers or accepts, or encourages others to offer or accept, an

inducement where the intent is to improperly influence the behavior of the


340.9 A3 The determination of whether there is actual or perceived intent to

improperly influence behavior requires the exercise of professional

judgment. Relevant factors to consider might include:

The nature, frequency, value and cumulative effect of the

inducement.



Timing of when the inducement is offered relative to any action or

decision that it might influence.

Whether the inducement is a customary or cultural practice in the

circumstances, for example, offering a gift on the occasion of a

religious holiday or wedding.

Whether the inducement is an ancillary part of a professional

service, for example, offering or accepting lunch in connection with

a business meeting.

Whether the offer of the inducement is limited to an individual

recipient or available to a broader group. The broader group might

be internal or external to the firm, such as other suppliers to the

client.

The roles and positions of the individuals at the firm or the client

offering or being offered the inducement.

Whether the chartered accountant knows, or has reason to believe,

that accepting the inducement would breach the policies and

procedures of the client.

The degree of transparency with which the inducement is offered.

Whether the inducement was required or requested by the recipient.

The known previous behavior or reputation of the offeror.

Consideration of Further Actions

340.10 A1 If the chartered accountant becomes aware of an inducement offered with

actual or perceived intent to improperly influence behavior, threats to

compliance with the fundamental principles might still be created even if the

requirements in paragraphs R340.7 and R340.8 are met.


Informing senior management of the firm or those charged with

governance of the client regarding the offer.

Amending or terminating the business relationship with the client.



Inducements with No Intent to Improperly Influence Behavior

340.11 A1 The requirements and application material set out in the conceptual

framework apply when a chartered accountant has concluded there is no

actual or perceived intent to improperly influence the behavior of the


340.11 A2 If such an inducement is trivial and inconsequential, any threats created will

be at an acceptable level.

340.11 A3 Examples of circumstances where offering or accepting such an inducement

might create threats even if the chartered accountant has concluded there is

no actual or perceived intent to improperly influence behavior include:

Self-interest threats

○ A chartered accountant is offered hospitality from the

prospective acquirer of a client while providing corporate

finance services to the client.

Familiarity threats

○ A chartered accountant regularly takes an existing or

prospective client to sporting events.

Intimidation threats

○ A chartered accountant accepts hospitality from a client, the

nature of which could be perceived to be inappropriate were it

to be publicly disclosed.

340.11 A4 Relevant factors in evaluating the level of such threats created by offering

or accepting such an inducement include the same factors set out in

paragraph 340.9 A3 for determining intent.

340.11 A5 Examples of actions that might eliminate threats created by offering or

accepting such an inducement include:

Declining or not offering the inducement.

Transferring responsibility for the provision of any professional

services to the client to another individual who the chartered

accountant has no reason to believe would be, or would be perceived

to be, improperly influenced when providing the services.

340.11 A6 Examples of actions that might be safeguards to address such threats created

by offering or accepting such an inducement include:



Being transparent with senior management of the firm or of the

client about offering or accepting an inducement.

Registering the inducement in a log monitored by senior

management of the firm or another individual responsible for the

firm’s ethics compliance or maintained by the client.

Having an appropriate reviewer, who is not otherwise involved in

providing the professional service, review any work performed or

decisions made by the chartered accountant with respect to the client

from which the accountant accepted the inducement.

Donating the inducement to charity after receipt and appropriately

disclosing the donation, for example, to a member of senior

management of the firm or the individual who offered the

inducement.

Reimbursing the cost of the inducement, such as hospitality,

received.

As soon as possible, returning the inducement, such as a gift, after it

was initially accepted.

Immediate or Close Family Members

R340.12 A chartered accountant shall remain alert to potential threats to the

accountant’s compliance with the fundamental principles created by the

offering of an inducement:

(a) By an immediate or close family member of the accountant to an

existing or prospective client of the accountant.

(b) To an immediate or close family member of the accountant by an

existing or prospective client of the accountant.

R340.13 Where the chartered accountant becomes aware of an inducement being

offered to or made by an immediate or close family member and concludes

there is intent to improperly influence the behavior of the accountant or of

an existing or prospective client of the accountant, or considers a reasonable

and informed third party would be likely to conclude such intent exists, the

accountant shall advise the immediate or close family member not to offer

or accept the inducement.

340.13 A1 The factors set out in paragraph 340.9 A3 are relevant in determining

whether there is actual or perceived intent to improperly influence the

behavior of the chartered accountant or of the existing or prospective client.



Another factor that is relevant is the nature or closeness of the relationship,

between:

(a) The accountant and the immediate or close family member;

(b) The immediate or close family member and the existing or

prospective client; and

(c) The accountant and the existing or prospective client.

For example, the offer of employment, outside of the normal recruitment

process, to the spouse of the accountant by a client for whom the accountant

is providing a business valuation for a prospective sale might indicate such

intent.

340.13 A2 The application material in paragraph 340.10 A2 is also relevant in

addressing threats that might be created when there is actual or perceived

intent to improperly influence the behavior of the chartered accountant, or

of the existing or prospective client even if the immediate or close family

member has followed the advice given pursuant to paragraph R340.13.

Application of the Conceptual Framework

340.14 A1 Where the chartered accountant becomes aware of an inducement offered in

the circumstances addressed in paragraph R340.12, threats to compliance

with the fundamental principles might be created where:

(a) The immediate or close family member offers or accepts the

inducement contrary to the advice of the accountant pursuant to

paragraph R340.13; or

(b) The accountant does not have reason to believe an actual or

perceived intent to improperly influence the behavior of the

accountant or of the existing or prospective client exists.

340.14 A2 The application material in paragraphs 340.11 A1 to 340.11 A6 is relevant

for the purposes of identifying, evaluating and addressing such threats.

Factors that are relevant in evaluating the level of threats in these

circumstances also include the nature or closeness of the relationships set

out in paragraph 340.13 A1.




340.15 A1 If a chartered accountant encounters or is made aware of inducements that

might result in non-compliance or suspected non-compliance with laws and

regulations by a client or individuals working for or under the direction of

the client, the requirements and application material in Section 360 apply.

340.15 A2 If a firm, network firm or an audit team member is being offered gifts or

hospitality from an audit client, the requirement and application material set

out in Section 420 apply.

340.15 A3 If a firm or an assurance team member is being offered gifts or hospitality

from an assurance client, the requirement and application material set out in

Section 906 apply.



SECTION 350

CUSTODY OF CLIENT ASSETS

Introduction




350.2 Holding client assets creates a self-interest or other threat to compliance with

the principles of professional behavior and objectivity. This section sets out

specific requirements and application material relevant to applying the

conceptual framework in such circumstances.


Before Taking Custody

R350.3 A chartered accountant shall not assume custody of client money or other

assets unless permitted to do so by law and in accordance with any

conditions under which such custody may be taken.

R350.4 As part of client and engagement acceptance procedures related to assuming

custody of client money or assets, a chartered accountant shall:

(a) Make inquiries about the source of the assets; and

(b) Consider related legal and regulatory obligations.

R350.4 A1 Inquiries about the source of client assets might reveal, for example, that the

assets were derived from illegal activities, such as money laundering. In such

circumstances, a threat would be created and the provisions of Section 360

would apply.

After Taking Custody

R350.5 A chartered accountant entrusted with money or other assets belonging to

others shall:

(a) Comply with the laws and regulations relevant to holding and

accounting for the assets;

(b) Keep the assets separately from personal or firm assets;

(c) Use the assets only for the purpose for which they are intended; and

(d) Be ready at all times to account for the assets and any income,

dividends, or gains generated, to any individuals entitled to that

accounting.



SECTION 360

RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS

Introduction




360.2 A self-interest or intimidation threat to compliance with the principles of

integrity and professional behavior is created when a chartered accountant

becomes aware of non-compliance or suspected non-compliance with laws

and regulations.

360.3 A chartered accountant might encounter or be made aware of non-

compliance or suspected non-compliance in the course of providing a

professional service to a client. This section guides the accountant in

assessing the implications of the matter and the possible courses of action

when responding to non-compliance or suspected non- compliance with:

(a) Laws and regulations generally recognized to have a direct effect on

the determination of material amounts and disclosures in the client’s

financial statements; and

(b) Other laws and regulations that do not have a direct effect on the

determination of the amounts and disclosures in the client’s financial

statements, but compliance with which might be fundamental to the

operating aspects of the client’s business, to its ability to continue its

business, or to avoid material penalties.

Objectives of the Chartered Accountant in Relation to Non-compliance with Laws

and Regulations

360.4 A distinguishing mark of the accountancy profession is its acceptance of the

responsibility to act in the public interest. When responding to non-

compliance or suspected non-compliance, the objectives of the chartered

accountant are:

(a) To comply with the principles of integrity and professional behavior;

(b) By alerting management or, where appropriate, those charged with

governance of the client, to seek to:

(i) Enable them to rectify, remediate or mitigate the

consequences of the identified or suspected non- compliance;

or



(ii) Deter the commission of the non-compliance where it has not

yet occurred; and

(c) To take such further action as appropriate in the public interest.


General

360.5 A1 Non-compliance with laws and regulations (“non-compliance”) comprises

acts of omission or commission, intentional or unintentional, which are

contrary to the prevailing laws or regulations committed by the following

parties:

(a) A client;

(b) Those charged with governance of a client;

(c) Management of a client; or

(d) Other individuals working for or under the direction of a client.

360.5 A2 Examples of laws and regulations which this section addresses include those

that deal with:

Fraud, corruption and bribery.

Money laundering, terrorist financing and proceeds of crime.

Securities markets and trading.

Banking and other financial products and services.

Data protection.

Tax and pension liabilities and payments.

Environmental protection.

Public health and safety.

360.5 A3 Non-compliance might result in fines, litigation or other consequences for

the client, potentially materially affecting its financial statements.

Importantly, such non-compliance might have wider public interest

implications in terms of potentially substantial harm to investors, creditors,

employees or the general public. For the purposes of this section, an act that

causes substantial harm is one that results in serious adverse consequences



to any of these parties in financial or non-financial terms. Examples include

the perpetration of a fraud resulting in significant financial losses to

investors, and breaches of environmental laws and regulations endangering

the health or safety of employees or the public.

R360.6 In some jurisdictions, there are legal or regulatory provisions governing how

chartered accountants should address non-compliance or suspected non-

compliance. These legal or regulatory provisions might differ from or go

beyond the provisions in this section. When encountering such non-

compliance or suspected non-compliance, the accountant shall obtain an

understanding of those legal or regulatory provisions and comply with them,

including:

(a) Any requirement to report the matter to an appropriate authority; and

(b) Any prohibition on alerting the client.

360.6 A1 A prohibition on alerting the client might arise, for example, pursuant to

anti-money laundering legislation.

360.7 A1 This section applies regardless of the nature of the client, including whether

or not it is a public interest entity.

360.7 A2 A chartered accountant who encounters or is made aware of matters that are

clearly inconsequential is not required to comply with this section. Whether

a matter is clearly inconsequential is to be judged with respect to its nature

and its impact, financial or otherwise, on the client, its stakeholders and the

general public.

360.7 A3 This section does not address:

(a) Personal misconduct unrelated to the business activities of the client;

and

(b) Non-compliance by parties other than those specified in paragraph

360.5 A1. This includes, for example, circumstances where a

chartered accountant has been engaged by a client to perform a due

diligence assignment on a third party entity and the identified or

suspected non-compliance has been committed by that third-party.

The accountant might nevertheless find the guidance in this section helpful

in considering how to respond in these situations.

Responsibilities of Management and Those Charged with Governance

360.8 A1 Management, with the oversight of those charged with governance, is

responsible for ensuring that the client’s business activities are conducted in

accordance with laws and regulations. Management and those charged with



governance are also responsible for identifying and addressing any non-

compliance by:

(a) The client;

(b) An individual charged with governance of the entity;

(c) A member of management; or

(d) Other individuals working for or under the direction of the client.

Responsibilities of All Chartered Accountants

R360.9 Where a chartered accountant becomes aware of a matter to which this

section applies, the steps that the accountant takes to comply with this

section shall be taken on a timely basis. In taking timely steps, the accountant

shall have regard to the nature of the matter and the potential harm to the

interests of the entity, investors, creditors, employees or the general public.

Audits of Financial Statements

Obtaining an Understanding of the Matter

R360.10 If a chartered accountant engaged to perform an audit of financial statements

becomes aware of information concerning non-compliance or suspected

non-compliance, the accountant shall obtain an understanding of the matter.

This understanding shall include the nature of the non-compliance or

suspected non-compliance and the circumstances in which it has occurred or

might occur.

360.10 A1 The chartered accountant might become aware of the non-compliance or

suspected non-compliance in the course of performing the engagement or

through information provided by other parties.



have a level of knowledge of laws and regulations greater than that which is

required to undertake the engagement. Whether an act constitutes non-

compliance is ultimately a matter to be determined by a court or other

appropriate adjudicative body.


accountant might consult on a confidential basis with others within the firm,

a network firm or a professional body, or with legal counsel.


occurred or might occur, the accountant shall discuss the matter with the



appropriate level of management and, where appropriate, those charged with

governance.

360.11 A1 The purpose of the discussion is to clarify the chartered accountant’s

understanding of the facts and circumstances relevant to the matter and its

potential consequences. The discussion also might prompt management or

those charged with governance to investigate the matter.

360.11 A2 The appropriate level of management with whom to discuss the matter is a

question of professional judgment. Relevant factors to consider include:

The nature and circumstances of the matter.

The individuals actually or potentially involved.

The likelihood of collusion.

The potential consequences of the matter.

Whether that level of management is able to investigate the matter

and take appropriate action.

360.11 A3 The appropriate level of management is usually at least one level above the

individual or individuals involved or potentially involved in the matter. In

the context of a group, the appropriate level might be management at an

entity that controls the client.

360.11 A4 The chartered accountant might also consider discussing the matter with

internal auditors, where applicable.

R360.12 If the chartered accountant believes that management is involved in the non-

compliance or suspected non-compliance, the accountant shall discuss the

matter with those charged with governance.

Addressing the Matter

R360.13 In discussing the non-compliance or suspected non-compliance with

management and, where appropriate, those charged with governance, the

chartered accountant shall advise them to take appropriate and timely

actions, if they have not already done so, to:

(a) Rectify, remediate or mitigate the consequences of the non-

compliance;

(b) Deter the commission of the non-compliance where it has not yet

occurred; or



(c) Disclose the matter to an appropriate authority where required by

law or regulation or where considered necessary in the public

interest.

R360.14 The chartered accountant shall consider whether management and those

charged with governance understand their legal or regulatory responsibilities

with respect to the non-compliance or suspected non-compliance.

360.14 A1 If management and those charged with governance do not understand their

legal or regulatory responsibilities with respect to the matter, the chartered

accountant might suggest appropriate sources of information or recommend

that they obtain legal advice.

R360.15 The chartered accountant shall comply with applicable:

(a) Laws and regulations, including legal or regulatory provisions

governing the reporting of non-compliance or suspected non-

compliance to an appropriate authority; and

(b) Requirements under auditing standards, including those relating to:

Identifying and responding to non-compliance, including

fraud.

Communicating with those charged with governance.

Considering the implications of the non-compliance or

suspected non-compliance for the auditor’s report.

360.15 A1 Some laws and regulations might stipulate a period within which reports of

non-compliance or suspected non-compliance are to be made to an

appropriate authority.

Communication with Respect to Groups

R360.16 Where a chartered accountant becomes aware of non-compliance or

suspected non-compliance in relation to a component of a group in either of

the following two situations, the accountant shall communicate the matter to

the group engagement partner unless prohibited from doing so by law or

regulation:

(a) The accountant is, for purposes of an audit of the group financial

statements, requested by the group engagement team to perform

work on financial information related to the component; or



(b) The accountant is engaged to perform an audit of the component’s

financial statements for purposes other than the group audit, for

example, a statutory audit.

The communication to the group engagement partner shall be in addition to

responding to the matter in accordance with the provisions of this section.

360.16 A1 The purpose of the communication is to enable the group engagement

partner to be informed about the matter and to determine, in the context of

the group audit, whether and, if so, how to address it in accordance with the

provisions in this section. The communication requirement in paragraph

R360.16 applies regardless of whether the group engagement partner’s firm

or network is the same as or different from the chartered accountant’s firm

or network.

R360.17 Where the group engagement partner becomes aware of non-compliance or

suspected non-compliance in the course of an audit of group financial

statements, the group engagement partner shall consider whether the matter

might be relevant to one or more components:

(a) Whose financial information is subject to work for purposes of the

audit of the group financial statements; or

(b) Whose financial statements are subject to audit for purposes other

than the group audit, for example, a statutory audit.

This consideration shall be in addition to responding to the matter in the

context of the group audit in accordance with the provisions of this section.

R360.18 If the non-compliance or suspected non-compliance might be relevant to one

or more of the components specified in paragraph R360.17(a) and (b), the

group engagement partner shall take steps to have the matter communicated

to those performing work at the components, unless prohibited from doing

so by law or regulation. If necessary, the group engagement partner shall

arrange for appropriate inquiries to be made (either of management or from

publicly available information) as to whether the relevant component(s)

specified in paragraph R360.17(b) is subject to audit and, if so, to ascertain

to the extent practicable the identity of the auditor.

360.18 A1 The purpose of the communication is to enable those responsible for work

at the components to be informed about the matter and to determine whether

and, if so, how to address it in accordance with the provisions in this section.

The communication requirement applies regardless of whether the group

engagement partner’s firm or network is the same as or different from the

firms or networks of those performing work at the components.



Determining Whether Further Action Is Needed

R360.19 The chartered accountant shall assess the appropriateness of the response of

management and, where applicable, those charged with governance.

360.19 A1 Relevant factors to consider in assessing the appropriateness of the response

of management and, where applicable, those charged with governance

include whether:

The response is timely.

The non-compliance or suspected non-compliance has been

adequately investigated.

Action has been, or is being, taken to rectify, remediate or mitigate

the consequences of any non-compliance.

Action has been, or is being, taken to deter the commission of any

non-compliance where it has not yet occurred.

Appropriate steps have been, or are being, taken to reduce the risk

of re-occurrence, for example, additional controls or training.

The non-compliance or suspected non-compliance has been

disclosed to an appropriate authority where appropriate and, if so,

whether the disclosure appears adequate.

R360.20 In light of the response of management and, where applicable, those charged

with governance, the chartered accountant shall determine if further action

is needed in the public interest.

360.20 A1 The determination of whether further action is needed, and the nature and

extent of it, will depend on various factors, including:



The pervasiveness of the matter throughout the client.

Whether the chartered accountant continues to have confidence in

the integrity of management and, where applicable, those charged

with governance.

Whether the non-compliance or suspected non-compliance is likely

to recur.



Whether there is credible evidence of actual or potential substantial

harm to the interests of the entity, investors, creditors, employees or

the general public.

360.20 A2 Examples of circumstances that might cause the chartered accountant no

longer to have confidence in the integrity of management and, where

applicable, those charged with governance include situations where:

The accountant suspects or has evidence of their involvement or

intended involvement in any non-compliance.

The accountant is aware that they have knowledge of such non-

compliance and, contrary to legal or regulatory requirements, have

not reported, or authorized the reporting of, the matter to an

appropriate authority within a reasonable period.

R360.21 The chartered accountant shall exercise professional judgment in

determining the need for, and nature and extent of, further action. In making

this determination, the accountant shall take into account whether a

reasonable and informed third party would be likely to conclude that the

accountant has acted appropriately in the public interest.

360.21 A1 Further action that the chartered accountant might take includes:



Withdrawing from the engagement and the professional relationship

where permitted by law or regulation.

360.21 A2 Withdrawing from the engagement and the professional relationship is not a

substitute for taking other actions that might be needed to achieve the

chartered accountant’s objectives under this section. In some jurisdictions,

however, there might be limitations as to the further actions available to the

accountant. In such circumstances, withdrawal might be the only available

course of action.

R360.22 Where the chartered accountant has withdrawn from the professional

relationship pursuant to paragraphs R360.20 and 360.21 A1, the accountant

shall, on request by the proposed accountant pursuant to paragraph R320.8,

provide all relevant facts and other information concerning the identified or

suspected non-compliance to the proposed accountant. The predecessor

accountant shall do so, even in the circumstances addressed in paragraph

R320.8(b) where the client fails or refuses to grant the predecessor

accountant permission to discuss the client’s affairs with the proposed

accountant, unless prohibited by law or regulation.



360.22 A1 The facts and other information to be provided are those that, in the

predecessor accountant’s opinion, the proposed accountant needs to be

aware of before deciding whether to accept the audit appointment. Section

320 addresses communications from proposed accountants.

R360.23 If the proposed accountant is unable to communicate with the predecessor

accountant, the proposed accountant shall take reasonable steps to obtain

information about the circumstances of the change of appointment by other

means.

360.23 A1 Other means to obtain information about the circumstances of the change of

appointment include inquiries of third parties or background investigations

of management or those charged with governance.

360.24 A1 As assessment of the matter might involve complex analysis and judgments,

the chartered accountant might consider:


Obtaining legal advice to understand the accountant’s options and

the professional or legal implications of taking any particular course

of action.


body.

Determining Whether to Disclose the Matter to an Appropriate Authority

360.25 A1 Disclosure of the matter to an appropriate authority would be precluded if

doing so would be contrary to law or regulation. Otherwise, the purpose of

making disclosure is to enable an appropriate authority to cause the matter

to be investigated and action to be taken in the public interest.

360.25 A2 The determination of whether to make such a disclosure depends in

particular on the nature and extent of the actual or potential harm that is or

might be caused by the matter to investors, creditors, employees or the

general public. For example, the chartered accountant might determine that

disclosure of the matter to an appropriate authority is an appropriate course

of action if:

The entity is engaged in bribery (for example, of local or foreign

government officials for purposes of securing large contracts).

The entity is regulated and the matter is of such significance as to

threaten its license to operate.



The entity is listed on a securities exchange and the matter might

result in adverse consequences to the fair and orderly market in the

entity’s securities or pose a systemic risk to the financial markets.

It is likely that the entity would sell products that are harmful to

public health or safety.

The entity is promoting a scheme to its clients to assist them in

evading taxes.

360.25 A3 The determination of whether to make such a disclosure will also depend on

external factors such as:

Whether there is an appropriate authority that is able to receive the

information, and cause the matter to be investigated and action to be

taken. The appropriate authority will depend on the nature of the

matter. For example, the appropriate authority would be a securities

regulator in the case of fraudulent financial reporting or an

environmental protection agency in the case of a breach of

environmental laws and regulations.

Whether there exists robust and credible protection from civil,

criminal or professional liability or retaliation afforded by

legislation or regulation, such as under whistle-blowing legislation

or regulation.

Whether there are actual or potential threats to the physical safety of

the chartered accountant or other individuals.

R360.26 If the chartered accountant determines that disclosure of the non-compliance

or suspected non-compliance to an appropriate authority is an appropriate

course of action in the circumstances, that disclosure is permitted pursuant

to paragraph R114.1(d) of the Code. When making such disclosure, the

accountant shall act in good faith and exercise caution when making

statements and assertions. The accountant shall also consider whether it is

appropriate to inform the client of the accountant’s intentions before

disclosing the matter.

Imminent Breach

R360.27 In exceptional circumstances, the chartered accountant might become aware

of actual or intended conduct that the accountant has reason to believe would

constitute an imminent breach of a law or regulation that would cause



with management or those charged with governance of the entity, the

accountant shall exercise professional judgment and determine whether to



disclose the matter immediately to an appropriate authority in order to

prevent or mitigate the consequences of such imminent breach. If disclosure

is made, that disclosure is permitted pursuant to paragraph R114.1(d) of the

Code.

Documentation

R360.28 In relation to non-compliance or suspected non-compliance that falls within

the scope of this section, the chartered accountant shall document:

How management and, where applicable, those charged with



made and the decisions that were taken, having regard to the

reasonable and informed third party test.



360.28 A1 This documentation is in addition to complying with the documentation

requirements under applicable auditing standards. ISAs, for example,

require a chartered accountant performing an audit of financial statements

to:

Prepare documentation sufficient to enable an understanding of

significant matters arising during the audit, the conclusions reached,

and significant professional judgments made in reaching those

conclusions;

Document discussions of significant matters with management,

those charged with governance, and others, including the nature of

the significant matters discussed and when and with whom the

discussions took place; and

Document identified or suspected non-compliance, and the results

of discussion with management and, where applicable, those

charged with governance and other parties outside the entity.

Professional Services Other than Audits of Financial Statements

Obtaining an Understanding of the Matter and Addressing it with Management and Those

Charged with Governance

R360.29 If a chartered accountant engaged to provide a professional service other

than an audit of financial statements becomes aware of information

concerning non-compliance or suspected non-compliance, the accountant



shall seek to obtain an understanding of the matter. This understanding shall

include the nature of the non-compliance or suspected non-compliance and

the circumstances in which it has occurred or might be about to occur.



have a level of understanding of laws and regulations beyond that which is

required for the professional service for which the accountant was engaged.

Whether an act constitutes actual non-compliance is ultimately a matter to

be determined by a court or other appropriate adjudicative body.


accountant might consult on a confidential basis with others within the firm,

a network firm or a professional body, or with legal counsel.


occurred or might occur, the accountant shall discuss the matter with the

appropriate level of management. If the accountant has access to those

charged with governance, the accountant shall also discuss the matter with

them where appropriate.

360.30 A1 The purpose of the discussion is to clarify the chartered accountant’s

understanding of the facts and circumstances relevant to the matter and its

potential consequences. The discussion also might prompt management or

those charged with governance to investigate the matter.

360.30 A2 The appropriate level of management with whom to discuss the matter is a

question of professional judgment. Relevant factors to consider include:

The nature and circumstances of the matter.

The individuals actually or potentially involved.

The likelihood of collusion.

The potential consequences of the matter.

Whether that level of management is able to investigate the matter

and take appropriate action.

Communicating the Matter to the Entity’s External Auditor

R360.31 If the chartered accountant is performing a non-audit service for:

(a) An audit client of the firm; or

(b) A component of an audit client of the firm,



the accountant shall communicate the non-compliance or suspected non-

compliance within the firm, unless prohibited from doing so by law or

regulation. The communication shall be made in accordance with the firm’s

protocols or procedures. In the absence of such protocols and procedures, it

shall be made directly to the audit engagement partner.

R360.32 If the chartered accountant is performing a non-audit service for:

(a) An audit client of a network firm; or

(b) A component of an audit client of a network firm,

the accountant shall consider whether to communicate the non-compliance

or suspected non-compliance to the network firm. Where the communication

is made, it shall be made in accordance with the network’s protocols or

procedures. In the absence of such protocols and procedures, it shall be made

directly to the audit engagement partner.

R360.33 If the chartered accountant is performing a non-audit service for a client that

is not:

(a) An audit client of the firm or a network firm; or

(b) A component of an audit client of the firm or a network firm,

the accountant shall consider whether to communicate the non-compliance

or suspected non-compliance to the firm that is the client’s external auditor,

if any.

Relevant Factors to Consider

360.34 A1 Factors relevant to considering the communication in accordance with

paragraphs R360.31 to R360.33 include:

Whether doing so would be contrary to law or regulation.

Whether there are restrictions about disclosure imposed by a

regulatory agency or prosecutor in an ongoing investigation into the

non-compliance or suspected non-compliance.

Whether the purpose of the engagement is to investigate potential

non-compliance within the entity to enable it to take appropriate

action.

Whether management or those charged with governance have

already informed the entity’s external auditor about the matter.



The likely materiality of the matter to the audit of the client’s

financial statements or, where the matter relates to a component of

a group, its likely materiality to the audit of the group financial

statements.

Purpose of Communication

360.35 A1 In the circumstances addressed in paragraphs R360.31 to R360.33, the

purpose of the communication is to enable the audit engagement partner to

be informed about the non-compliance or suspected non-compliance and to

determine whether and, if so, how to address it in accordance with the

provisions of this section.

Considering Whether Further Action Is Needed

R360.36 The chartered accountant shall also consider whether further action is

needed in the public interest.

360.36 A1 Whether further action is needed, and the nature and extent of it, will depend

on factors such as:


The appropriateness and timeliness of the response of management

and, where applicable, those charged with governance.


The involvement of management or those charged with governance

in the matter.

The likelihood of substantial harm to the interests of the client,

investors, creditors, employees or the general public.

360.36 A2 Further action by the chartered accountant might include:



Withdrawing from the engagement and the professional relationship

where permitted by law or regulation.

360.36 A3 In considering whether to disclose to an appropriate authority, relevant

factors to take into account include:

Whether doing so would be contrary to law or regulation.



Whether there are restrictions about disclosure imposed by a

regulatory agency or prosecutor in an ongoing investigation into the

non-compliance or suspected non-compliance.

Whether the purpose of the engagement is to investigate potential

non-compliance within the entity to enable it to take appropriate

action.

R360.37 If the chartered accountant determines that disclosure of the non-compliance

or suspected non-compliance to an appropriate authority is an appropriate

course of action in the circumstances, that disclosure is permitted pursuant

to paragraph R114.1(d) of the Code. When making such disclosure, the

accountant shall act in good faith and exercise caution when making

statements and assertions. The accountant shall also consider whether it is

appropriate to inform the client of the accountant’s intentions before

disclosing the matter.

Imminent Breach

R360.38 In exceptional circumstances, the chartered accountant might become aware

of actual or intended conduct that the accountant has reason to believe would

constitute an imminent breach of a law or regulation that would cause



with management or those charged with governance of the entity, the

accountant shall exercise professional judgment and determine whether to

disclose the matter immediately to an appropriate authority in order to

prevent or mitigate the consequences of such imminent breach of law or

regulation. If disclosure is made, that disclosure is permitted pursuant to

paragraph R114.1(d) of the Code.

Seeking Advice

360.39 A1 The chartered accountant might consider:


Obtaining legal advice to understand the professional or legal

implications of taking any particular course of action.


body.



Documentation


the scope of this section, the chartered accountant is encouraged to

document:

The matter.

The results of discussion with management and, where applicable,

those charged with governance and other parties.

How management and, where applicable, those charged with








SECTION 370

PUBLIC NOTICES, ANNOUNCEMENTS AND COMMUNICATIONS UNDUE

PUBLICITY BE AVOIDED

R370.1 In any communications, announcements and public notices, chartered

accountants should not:

(a) use means, which bring the profession into disrepute;

(b) make exaggerated claims for the services they are able to offer, the

qualifications they possess, or experience they have gained; and

(c) denigrate the work of other accountants.

A chartered accountant preparing or authorizing the issue of matter falling

within this Section should do so with a due sense of responsibility to the

profession and to the public as a whole. In particular, such material should

be in good taste both as to content and presentation and should not belittle

services offered by others, whether members or not, either by claiming

superiority for the services of a particular member or otherwise. The same

attitude should be adopted towards activities mentioned in subsequent

paragraphs.

Advertising for solicitation be avoided

R370.2 All communications, announcements and public notices be issued in such

manner and within the limits prescribed in the following paragraphs so that

the provisions of clauses (5) and (6) of Part 1 and clauses (1) and (2) of Part

2 of Schedule-I of the Chartered Accountants Ordinance, 1961, are not

violated:

(a) All announcements, communications and public notices should:

(i) be aimed at informing the recipients or the public in an

objective manner;

(ii) conform to the basic principles of legality, decency, clarity,

honesty and truthfulness; and

(iii) not project an image, which is inconsistent with that of a

professional person bound to high ethical and technical

standards.



(b) Activities which may expressly be considered not to meet the above

criteria and are therefore prohibited include those that:

(i) create false, deceptive or unjustified expectations of favorable

results;

(ii) imply the ability to influence any court, tribunal, regulatory

agency or similar body or official;

(iii) consist of self-laudatory statements that are not based on

verifiable facts;

(iv) make comparisons with other chartered accountants in

practice;

(v) contain testimonials or endorsements;

(vi) contain any other representations that would be likely to cause

a reasonable person to misunderstand or be deceived; and

(vii) make unjustified claims to be an expert or specialist in a

particular field of accountancy.

(c) The examples which follow are illustrative of circumstances in

which communications, announcements, public notices, etc., are

acceptable and the matters to be considered in connection therewith

subject always to the overriding requirements mentioned in the

preceding paragraphs:

(i) Appointments and Awards

It is in the interests of the public and the profession that any

appointment or other activity of a chartered accountant in a

matter of national or local importance, or the award of any

distinction to a member, should receive publicity and that

membership of the Institute should be mentioned. However,

the chartered accountant should not make use of any of the

aforementioned appointments or activities for personal

professional advantage.

(ii) Chartered Accountants seeking employment or Professional

Business

A chartered accountant may inform interested parties through

any medium that a partnership or salaried employment of an

accountancy nature is being sought. The chartered accountants

should not, however, publicize for subcontract work in a

manner, which could be interpreted as seeking to procure



professional business. Public announcements or public notices

seeking subcontract work may be acceptable if placed only in

the professional press and provided that neither the chartered

accountant's name, address or telephone number appears in the

public announcements or public notices. A chartered

accountant may write a letter or make a direct approach to

another chartered accountant when seeking employment or

professional business.

(iii) Directories & Internet

A chartered accountant and his firm may be listed in the

directories both alphabetically and in lead type and in

classified list under "Chartered Accountants" in the

directories. He can however, use the classification

"Accountants and Auditors" when the directories do not have

specific classification for "Chartered Accountants". Entries

should be limited to name, address, telephone numbers,

internet address, e-mail address, professional description and

any other information necessary to enable the users of the

directories to make contact with the chartered accountant and

his firm may also develop and maintain a website on the

internet provided the contents comply with the requirements

of paragraphs 370.1, (a) and (b) of 370.2 and (ix) of 370.2(c).

(iv) Books, Articles, Interviews, Lectures, and Electronic Media

A member who is author of a book or articles on a professional

subject, may state his name and professional qualifications and

give the name of his firm but shall not give any information as

to the services that the firm provides.

Similar provisions are applicable to participation by a

chartered accountant in practice in a lecture, interview or a

radio or television program on a professional subject. What

practicing member write or say, however, should not be

promotional of themselves or their firm but should be an

objective professional view of the topic under consideration.

Practicing members are responsible for using their best

endeavors to ensure that what ultimately goes before the

public complies with these requirements.

When interviewed by a writer or reporter, the chartered

accountant should observe the limitations imposed on him by

this Section. The chartered accountant may not provide the

press with any information for publication that he could not

publish himself.



(v) Training Courses, Seminars, etc.

A chartered accountant may invite clients, their staff and the

general public to attend training courses or seminars

conducted for imparting professional education. However,

undue prominence should not be given to the name of a

chartered accountant in any booklets or documents issued in

connection therewith.

(vi) Professional Literature and Publications

Any professional literature bearing the name of a chartered

accountant or his firm giving technical information for the

assistance of staff and clients may be issued to any other firm

or persons.

A publication developed/ authored by a firm may be published

in the firm's name but it shall not give any information as to

the services that the firm provides.

Such professional literature and publications can also be

placed on the website of the firm.

(vii) Staff Recruitment

Genuine vacancies for staff may be communicated to the

public through any medium in which comparable staff

vacancies normally appear. The fact that a job specification

necessarily gives some detail as to one or more of the services

provided by the chartered accountant or his firm is acceptable

but it should not contain any promotional element. There

should not be any suggestion that the services offered are

superior to those offered by other chartered accountants as a

consequence of size, associations, or for any other reason.

In publications such as those specifically directed to schools

and other places of education to inform students and graduates

of career opportunities in the profession, services offered to

the public may be described in a businesslike way.

More latitude may also be permissible in a section of a

newspaper devoted to staff vacancies than would be allowed

if the vacancy appears in a prominent position elsewhere in a

newspaper on the grounds that it would be most unlikely that

a potential client would use such media to select his

professional adviser.



(viii) Recruitment on behalf of clients

A member may advertise on behalf of clients. However, he

should ensure that the emphasis in the advertisement is

directed towards the objectives to be achieved for the client.

The designation of any services provided by the practice as

being of specialist nature is not permitted.

(ix) Brochures and Firm Directories

A chartered accountant in practice may issue:

(a) A factual and objectively worded account of the

services provided, the firm's resources (human and

other, specifying qualifications and experience of

personnel where appropriate), existing clients (unless

this breaches client confidentiality) and of professional

assignments undertaken; and

(b) A directory setting out names of partners, office

addresses and names and addresses of associated firms

and correspondents.

(x) Stationery and Nameplates

Stationery of chartered accountants in practice should be of an

acceptable professional standard and comply with the

requirements of the directives issued by the Council of the

Institute from time to time as to names of partners, principals

and others who participate in the practice, use of professional

descriptions and designatory letters, cities or countries where

the practice is represented, logotypes, etc. The designation of

any services provided by the practice as being of specialist

nature is not permitted. Similar provisions apply to

nameplates.

(xi) Newspaper Announcements

Appropriate newspapers or magazines may be used to inform

the public of the establishment of a new practice, of changes

in the composition of a partnership, or of any alteration in the

address and telephone number of a practice.

Such announcements should be limited to a bare statement of

facts and consideration given to the appropriateness of the area

of distribution of the newspaper or magazine and number of

insertions.



(xii) Inclusion of the name of a chartered accountant in practice in

a document issued by a client

When a client proposes to publish a report by a chartered

accountant in practice dealing with the client's existing

business affairs or in connection with the establishment of a

new business venture, chartered accountant in practice should

take steps to ensure that the context in which the report is

published is not such as might result in the public being misled

as to the nature and meaning of the report. In these

circumstances, practicing member should advise the client that

permission should first be obtained before publication of the

document.

Similar consideration should be given to other documents

proposed to be issued by a client containing the name of a

chartered accountant in practice acting in an independent

professional capacity.

This does not preclude the inclusion of the name of a chartered

accountant in practice in the annual report of a client.

When chartered accountant in practice in their private capacity

are associated with, or hold office in, an organization, the

organization may use their name and professional status on

stationery and other documents. The chartered accountant in

practice should ensure that this information is not used in such

a way as might lead the public to believe that there is a

connection with the organization in an independent

professional capacity.

(xiii) Advertising material used to promote a course, which he has

been asked to conduct

It is of value to prospective students and course participants to

know the instructor's background - such as degrees he holds,

professional body affiliations, and the name of his firm. The

chartered accountant has the responsibility to ascertain that all

promotional efforts are within the bounds of this Section.

(xiv) The use of the CA title on an Employer's Stationery

The use of the CA title on an employer's stationery by a

chartered accountant not in practice is proper. It would also be

proper for the CA title of the member to appear in paid

advertisements of the employer that list the officers and

directors.



(xv) Greeting and Invitation Cards

Greeting and invitation cards may be sent in the name of a

chartered accountant or his firm. Professional qualifications

may be indicated but no information shall be given regarding

the services that the chartered accountant or the firm provides.


Page 124 of 263 INDEX OF PART 4A

INTERNA TIONAL INDEP ENDENCE STANDARD S (PAR TS 4A AND 4B)

PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS

Section 400 Applying the Conceptual Framework to Independence for Audit and

Review Engagements ................................................................................ 125

Section 410 Fees ........................................................................................................... 140

Section 411 Compensation and Evaluation Policies ..................................................... 144

Section 420 Gifts and Hospitality ................................................................................. 145

Section 430 Actual or Threatened Litigation ................................................................ 146

Section 510 Financial Interests ..................................................................................... 147

Section 511 Loans and Guarantees ............................................................................... 153

Section 520 Business Relationships .............................................................................. 155

Section 521 Family and Personal Relationships ........................................................... 157

Section 522 Recent Service with an Audit Client ......................................................... 161

Section 523 Serving as a Director or Officer of an Audit Client .................................. 163

Section 524 Employment with an Audit Client............................................................. 164

Section 525 Temporary Personnel Assignments ........................................................... 168

Section 540 Long Association of Personnel (Including Partner Rotation) with an Audit

Client ......................................................................................................... 169

Section 600 Provision of Non-Assurance Services to an Audit Client ......................... 175

Subsection 601 Accounting and Bookkeeping Services ..................................... 180

Subsection 602 Administrative Services ............................................................. 183

Subsection 603 Valuation Services ..................................................................... 184

Subsection 604 Tax Services .............................................................................. 186

Subsection 605 Internal Audit Services .............................................................. 192

Subsection 606 Information Technology Systems Services ............................... 196

Subsection 607 Litigation Support Services ....................................................... 198

Subsection 608 Legal Services ........................................................................... 199

Subsection 609 Recruiting Services .................................................................... 201

Subsection 610 Corporate Finance Services ....................................................... 203

Section 800 Reports on Special Purpose Financial Statements that Include a Restriction

on Use and Distribution (Audit and Review Engagements) ...................... 206



INTERNATIONAL INDEPENDENCE STANDARDS (PARTS 4A AND 4B)

PART 4A - INDEPENDENCE FOR AUDIT AND REVIEW

ENGAGEMENTS

SECTION 400

APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR

AUDIT AND REVIEW ENGAGEMENTS

Introduction

General

400.1 It is in the public interest and required by the Code that chartered accountants

in practice be independent when performing audit or review engagements.

400.2 This Part applies to both audit and review engagements. The terms “audit,”

“audit team,” “audit engagement,” “audit client,” and “audit report” apply

equally to review, review team, review engagement, review client, and

review engagement report.



400.4 ISQC 1 requires a firm to establish policies and procedures designed to

provide it with reasonable assurance that the firm, its personnel and, where

applicable, others subject to independence requirements (including network

firm personnel), maintain independence where required by relevant ethics

requirements. ISAs and ISREs establish responsibilities for engagement

partners and engagement teams at the level of the engagement for audits and

reviews, respectively. The allocation of responsibilities within a firm will

depend on its size, structure and organization. Many of the provisions of this

Part do not prescribe the specific responsibility of individuals within the firm

for actions related to independence, instead referring to “firm” for ease of

reference. Firms assign responsibility for a particular action to an individual

or a group of individuals (such as an audit team), in accordance with ISQC

1. In addition, an individual chartered accountant remains responsible for

compliance with any provisions that apply to that accountant’s activities,

interests or relationships.

400.5 Independence is linked to the principles of objectivity and integrity. It

comprises:


of a conclusion without being affected by influences that

compromise professional judgment, thereby allowing an individual



to act with integrity, and exercise objectivity and professional

skepticism.



third party would be likely to conclude that a firm’s, or an audit team

member’s, integrity, objectivity or professional skepticism has been

compromised.

In this Part, references to an individual or firm being “independent” mean

that the individual or firm has complied with the provisions of this Part.

400.6 When performing audit engagements, the Code requires firms to comply

with the fundamental principles and be independent. This Part sets out

specific requirements and application material on how to apply the

conceptual framework to maintain independence when performing such

engagements. The conceptual framework set out in Section 120 applies to

independence as it does to the fundamental principles set out in Section 110.

400.7 This Part describes:

(a) Facts and circumstances, including professional activities, interests

and relationships, that create or might create threats to

independence;

(b) Potential actions, including safeguards, that might be appropriate to

address any such threats; and

(c) Some situations where the threats cannot be eliminated or there can

be no safeguards to reduce them to an acceptable level.

Public Interest Entities

400.8 Some of the requirements and application material set out in this Part reflect

the extent of public interest in certain entities which are defined to be public

interest entities. Firms are encouraged to determine whether to treat

additional entities, or certain categories of entities, as public interest entities

because they have a large number and wide range of stakeholders. Factors

to be considered include:

The nature of the business, such as the holding of assets in a

fiduciary capacity for a large number of stakeholders. Examples

might include financial institutions, such as banks and insurance

companies, and pension funds.

Size.



Number of employees.

Reports that Include a Restriction on Use and Distribution

400.9 An audit report might include a restriction on use and distribution. If it does

and the conditions set out in Section 800 are met, then the independence

requirements in this Part may be modified as provided in Section 800.

Assurance Engagements other than Audit and Review Engagements

400.10 Independence standards for assurance engagements that are not audit or

review engagements are set out in Part 4B – Independence for Assurance

Engagements Other than Audit and Review Engagements.


General

R400.11 A firm performing an audit engagement shall be independent.

R400.12 A firm shall apply the conceptual framework set out in Section 120 to

identify, evaluate and address threats to independence in relation to an audit

engagement.

[Paragraphs 400.13 to 400.19 are intentionally left blank]

Related Entities

R400.20 As defined, an audit client that is a listed entity includes all of its related

entities. For all other entities, references to an audit client in this Part include

related entities over which the client has direct or indirect control. When the

audit team knows, or has reason to believe, that a relationship or

circumstance involving any other related entity of the client is relevant to

the evaluation of the firm’s independence from the client, the audit team

shall include that related entity when identifying, evaluating and addressing

threats to independence.


Period During which Independence is Required

R400.30 Independence, as required by this Part, shall be maintained during both:

(a) The engagement period; and

(b) The period covered by the financial statements.



400.30 A1 The engagement period starts when the audit team begins to perform the

audit. The engagement period ends when the audit report is issued. When

the engagement is of a recurring nature, it ends at the later of the notification

by either party that the professional relationship has ended or the issuance

of the final audit report.

R400.31 If an entity becomes an audit client during or after the period covered by the

financial statements on which the firm will express an opinion, the firm shall

determine whether any threats to independence are created by:

(a) Financial or business relationships with the audit client during or

after the period covered by the financial statements but before

accepting the audit engagement; or

(b) Previous services provided to the audit client by the firm or a

network firm.

400.31 A1 Threats to independence are created if a non-assurance service was provided

to an audit client during, or after the period covered by the financial

statements, but before the audit team begins to perform the audit, and the

service would not be permitted during the engagement period.


Using professionals who are not audit team members to perform the

service.

Having an appropriate reviewer review the audit and non-assurance

work as appropriate.

Engaging another firm outside of the network to evaluate the results

of the non-assurance service or having another firm outside of the

network re-perform the non-assurance service to the extent

necessary to enable the other firm to take responsibility for the

service.


Communication with those Charged with Governance

400.40 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to

communicating with those charged with governance.

400.40 A2 Even when not required by the Code, applicable professional standards, laws

or regulations, regular communication is encouraged between a firm and

those charged with governance of the client regarding relationships and

other matters that might, in the firm’s opinion, reasonably bear on



independence. Such communication enables those charged with governance

to:

(a) Consider the firm’s judgments in identifying and evaluating threats;

(b) Consider how threats have been addressed including the

appropriateness of safeguards when they are available and capable

of being applied; and

(c) Take appropriate action.

Such an approach can be particularly helpful with respect to intimidation

and familiarity threats.


Network Firms

400.50 A1 Firms frequently form larger structures with other firms and entities to

enhance their ability to provide professional services. Whether these larger

structures create a network depends on the particular facts and

circumstances. It does not depend on whether the firms and entities are

legally separate and distinct.

R400.51 A network firm shall be independent of the audit clients of the other firms

within the network as required by this Part.

400.51 A1 The independence requirements in this Part that apply to a network firm

apply to any entity that meets the definition of a network firm. It is not

necessary for the entity also to meet the definition of a firm. For example, a

consulting practice or professional law practice might be a network firm but

not a firm.

R400.52 When associated with a larger structure of other firms and entities, a firm

shall:

(a) Exercise professional judgment to determine whether a network is

created by such a larger structure;

(b) Consider whether a reasonable and informed third party would be

likely to conclude that the other firms and entities in the larger

structure are associated in such a way that a network exists; and

(c) Apply such judgment consistently throughout such a larger

structure.



R400.53 When determining whether a network is created by a larger structure of firms

and other entities, a firm shall conclude that a network exists when such a

larger structure is aimed at co-operation and:

(a) It is clearly aimed at profit or cost sharing among the entities within

the structure. (Ref: Para. 400.53 A2);

(b) The entities within the structure share common ownership, control

or management. (Ref: Para. 400.53 A3);

(c) The entities within the structure share common quality control

policies and procedures. (Ref: Para. 400.53 A4);

(d) The entities within the structure share a common business strategy.

(Ref: Para. 400.53 A5);

(e) The entities within the structure share the use of a common brand

name. (Ref: Para. 400.53 A6, 400.53 A7); or

(f) The entities within the structure share a significant part of

professional resources. (Ref: Para 400.53 A8, 400.53 A9).

400.53 A1 There might be other arrangements between firms and entities within a larger

structure that constitute a network, in addition to those arrangements

described in paragraph R400.53. However, a larger structure might be aimed

only at facilitating the referral of work, which in itself does not meet the

criteria necessary to constitute a network.

400.53 A2 The sharing of immaterial costs does not in itself create a network. In

addition, if the sharing of costs is limited only to those costs related to the

development of audit methodologies, manuals or training courses, this

would not in itself create a network. Further, an association between a firm

and an otherwise unrelated entity jointly to provide a service or develop a

product does not in itself create a network. (Ref: Para. R400.53(a)).

400.53 A3 Common ownership, control or management might be achieved by contract

or other means. (Ref: Para. R400.53(b)).

400.53 A4 Common quality control policies and procedures are those designed,

implemented and monitored across the larger structure. (Ref: Para.

R400.53(c)).

400.53 A5 Sharing a common business strategy involves an agreement by the entities

to achieve common strategic objectives. An entity is not a network firm

merely because it co-operates with another entity solely to respond jointly

to a request for a proposal for the provision of a professional service. (Ref:

Para. R400.53(d)).



400.53 A6 A common brand name includes common initials or a common name. A firm

is using a common brand name if it includes, for example, the common brand

name as part of, or along with, its firm name when a partner of the firm signs

an audit report. (Ref: Para. R400.53(e)).

400.53 A7 Even if a firm does not belong to a network and does not use a common

brand name as part of its firm name, it might appear to belong to a network

if its stationery or promotional materials refer to the firm being a member of

an association of firms. Accordingly, if care is not taken in how a firm

describes such membership, a perception might be created that the firm

belongs to a network. (Ref: Para. R400.53(e)).

400.53 A8 Professional resources include:

Common systems that enable firms to exchange information such as

client data, billing and time records.

Partners and other personnel.

Technical departments that consult on technical or industry specific

issues, transactions or events for assurance engagements.

Audit methodology or audit manuals.

Training courses and facilities. (Ref: Para. R400.53(f)).

400.53 A9 Whether the shared professional resources are significant depends on the

circumstances. For example:

The shared resources might be limited to common audit

methodology or audit manuals, with no exchange of personnel or

client or market information. In such circumstances, it is unlikely

that the shared resources would be significant. The same applies to

a common training endeavor.

The shared resources might involve the exchange of personnel or

information, such as where personnel are drawn from a shared pool,

or where a common technical department is created within the larger

structure to provide participating firms with technical advice that the

firms are required to follow. In such circumstances, a reasonable and

informed third party is more likely to conclude that the shared

resources are significant. (Ref: Para. R400.53(f)).

R400.54 If a firm or a network sells a component of its practice, and the component

continues to use all or part of the firm’s or network’s name for a limited

time, the relevant entities shall determine how to disclose that they are not

network firms when presenting themselves to outside parties.



400.54 A1 The agreement for the sale of a component of a practice might provide that,

for a limited period of time, the sold component can continue to use all or

part of the name of the firm or the network, even though it is no longer

connected to the firm or the network. In such circumstances, while the two

entities might be practicing under a common name, the facts are such that

they do not belong to a larger structure aimed at cooperation. The two

entities are therefore not network firms.


General Documentation of Independence for Audit and Review Engagements

R400.60 A firm shall document conclusions regarding compliance with this Part, and

the substance of any relevant discussions that support those conclusions. In

particular:

(a) When safeguards are applied to address a threat, the firm shall

document the nature of the threat and the safeguards in place or

applied; and

(b) When a threat required significant analysis and the firm concluded

that the threat was already at an acceptable level, the firm shall

document the nature of the threat and the rationale for the

conclusion.

400.60 A1 Documentation provides evidence of the firm’s judgments in forming

conclusions regarding compliance with this Part. However, a lack of

documentation does not determine whether a firm considered a particular

matter or whether the firm is independent.


Mergers and Acquisitions

When a Client Merger Creates a Threat

400.70 A1 An entity might become a related entity of an audit client because of a

merger or acquisition. A threat to independence and, therefore, to the ability

of a firm to continue an audit engagement might be created by previous or

current interests or relationships between a firm or network firm and such a

related entity.

R400.71 In the circumstances set out in paragraph 400.70 A1

(a) The firm shall identify and evaluate previous and current interests

and relationships with the related entity that, taking into account any

actions taken to address the threat, might affect its independence and



therefore its ability to continue the audit engagement after the

effective date of the merger or acquisition; and

(b) Subject to paragraph R400.72, the firm shall take steps to end any

interests or relationships that are not permitted by the Code by the

effective date of the merger or acquisition.

R400.72 As an exception to paragraph R400.71(b), if the interest or relationship

cannot reasonably be ended by the effective date of the merger or

acquisition, the firm shall:

(a) Evaluate the threat that is created by the interest or relationship; and

(b) Discuss with those charged with governance the reasons why the

interest or relationship cannot reasonably be ended by the effective

date and the evaluation of the level of the threat.

400.72 A1 In some circumstances, it might not be reasonably possible to end an interest

or relationship creating a threat by the effective date of the merger or

acquisition. This might be because the firm provides a non-assurance service

to the related entity, which the entity is not able to transition in an orderly

manner to another provider by that date.

400.72 A2 Factors that are relevant in evaluating the level of a threat created by mergers

and acquisitions when there are interests and relationships that cannot

reasonably be ended include:

The nature and significance of the interest or relationship.

The nature and significance of the related entity relationship (for

example, whether the related entity is a subsidiary or parent).

The length of time until the interest or relationship can reasonably

be ended.

R400.73 If, following the discussion set out in paragraph R400.72(b), those charged

with governance request the firm to continue as the auditor, the firm shall do

so only if:

(a) The interest or relationship will be ended as soon as reasonably

possible but no later than six months after the effective date of the

merger or acquisition;

(b) Any individual who has such an interest or relationship, including

one that has arisen through performing a non-assurance service that

would not be permitted by Section 600 and its subsections, will not



be a member of the engagement team for the audit or the individual

responsible for the engagement quality control review; and

(c) Transitional measures will be applied, as necessary, and discussed

with those charged with governance.

400.73 A1 Examples of such transitional measures include:

Having a chartered accountant review the audit or non-assurance

work as appropriate.

Having a chartered accountant, who is not a member of the firm

expressing the opinion on the financial statements, perform a review

that is equivalent to an engagement quality control review.

Engaging another firm to evaluate the results of the non-assurance

service or having another firm re-perform the non-assurance service

to the extent necessary to enable the other firm to take responsibility

for the service.

R400.74 The firm might have completed a significant amount of work on the audit

prior to the effective date of the merger or acquisition and might be able to

complete the remaining audit procedures within a short period of time. In

such circumstances, if those charged with governance request the firm to

complete the audit while continuing with an interest or relationship

identified in paragraph 400.70 A1, the firm shall only do so if it:

(a) Has evaluated the level of the threat and discussed the results with

those charged with governance;

(b) Complies with the requirements of paragraph R400.73(a) to (c); and

(c) Ceases to be the auditor no later than the date that the audit report is

issued.

If Objectivity Remains Compromised

R400.75 Even if all the requirements of paragraphs R400.71 to R400.74 could be met,

the firm shall determine whether the circumstances identified in paragraph

400.70 A1 create a threat that cannot be addressed such that objectivity

would be compromised. If so, the firm shall cease to be the auditor.



Documentation

R400.76 The firm shall document:

(a) Any interests or relationships identified in paragraph 400.70 A1 that

will not be ended by the effective date of the merger or acquisition

and the reasons why they will not be ended;

(b) The transitional measures applied;

(c) The results of the discussion with those charged with governance;

and

(d) The reasons why the previous and current interests and relationships

do not create a threat such that objectivity would be compromised.

[Paragraphs 400.77 to 400.79 are intentionally left blank.]

Breach of an Independence Provision for Audit and Review Engagements

When a Firm Identifies a Breach

R400.80 If a firm concludes that a breach of a requirement in this Part has occurred,

the firm shall:

(a) End, suspend or eliminate the interest or relationship that created the

breach and address the consequences of the breach;

(b) Consider whether any legal or regulatory requirements apply to the

breach and, if so:

(i) Comply with those requirements; and

(ii) Consider reporting the breach to a professional or

regulatory body or oversight authority if such reporting is

common practice or expected in the relevant jurisdiction;

(c) Promptly communicate the breach in accordance with its policies

and procedures to:

(i) The engagement partner;

(ii) Those with responsibility for the policies and procedures

relating to independence;

(iii) Other relevant personnel in the firm and, where

appropriate, the network; and



(iv) Those subject to the independence requirements in Part

4A who need to take appropriate action;

(d) Evaluate the significance of the breach and its impact on the firm’s

objectivity and ability to issue an audit report; and

(e) Depending on the significance of the breach, determine:

(i) Whether to end the audit engagement; or

(ii) Whether it is possible to take action that satisfactorily

addresses the consequences of the breach and whether

such action can be taken and is appropriate in the

circumstances.

In making this determination, the firm shall exercise professional judgment

and take into account whether a reasonable and informed third party would

be likely to conclude that the firm’s objectivity would be compromised, and

therefore, the firm would be unable to issue an audit report.

400.80 A1 A breach of a provision of this Part might occur despite the firm having

policies and procedures designed to provide it with reasonable assurance that

independence is maintained. It might be necessary to end the audit

engagement because of the breach.

400.80 A2 The significance and impact of a breach on the firm’s objectivity and ability

to issue an audit report will depend on factors such as:

The nature and duration of the breach.

The number and nature of any previous breaches with respect to the

current audit engagement.

Whether an audit team member had knowledge of the interest or

relationship that created the breach.

Whether the individual who created the breach is an audit team

member or another individual for whom there are independence

requirements.

If the breach relates to an audit team member, the role of that

individual.

If the breach was created by providing a professional service, the

impact of that service, if any, on the accounting records or the

amounts recorded in the financial statements on which the firm will

express an opinion.



The extent of the self-interest, advocacy, intimidation or other

threats created by the breach.

400.80 A3 Depending upon the significance of the breach, examples of actions that the

firm might consider to address the breach satisfactorily include:

Removing the relevant individual from the audit team.

Using different individuals to conduct an additional review of the

affected audit work or to re-perform that work to the extent

necessary.

Recommending that the audit client engage another firm to review

or re-perform the affected audit work to the extent necessary.

If the breach relates to a non-assurance service that affects the

accounting records or an amount recorded in the financial

statements, engaging another firm to evaluate the results of the non-

assurance service or having another firm re-perform the non-

assurance service to the extent necessary to enable the other firm to

take responsibility for the service.

R400.81 If the firm determines that action cannot be taken to address the

consequences of the breach satisfactorily, the firm shall inform those

charged with governance as soon as possible and take the steps necessary to

end the audit engagement in compliance with any applicable legal or

regulatory requirements. Where ending the engagement is not permitted by

laws or regulations, the firm shall comply with any reporting or disclosure

requirements.

R400.82 If the firm determines that action can be taken to address the consequences

of the breach satisfactorily, the firm shall discuss with those charged with

governance:

(a) The significance of the breach, including its nature and duration;

(b) How the breach occurred and how it was identified;

(c) The action proposed or taken and why the action will satisfactorily

address the consequences of the breach and enable the firm to issue

an audit report;

(d) The conclusion that, in the firm’s professional judgment, objectivity

has not been compromised and the rationale for that conclusion; and



(e) Any steps proposed or taken by the firm to reduce or avoid the risk

of further breaches occurring.

Such discussion shall take place as soon as possible unless an alternative

timing is specified by those charged with governance for reporting less

significant breaches.

Communication of Breaches to Those Charged with Governance

400.83 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to

communicating with those charged with governance.

R400.84 With respect to breaches, the firm shall communicate in writing to those

charged with governance:

(a) All matters discussed in accordance with paragraph R400.82 and

obtain the concurrence of those charged with governance that action

can be, or has been, taken to satisfactorily address the consequences

of the breach; and

(b) A description of:

(i) The firm’s policies and procedures relevant to the breach

designed to provide it with reasonable assurance that

independence is maintained; and

(ii) Any steps that the firm has taken, or proposes to take, to reduce

or avoid the risk of further breaches occurring.

R400.85 If those charged with governance do not concur that the action proposed by

the firm in accordance with paragraph R400.80(e)(ii) satisfactorily addresses

the consequences of the breach, the firm shall take the steps necessary to end

the audit engagement in accordance with paragraph R400.81.

Breaches Before the Previous Audit Report was Issued

R400.86 If the breach occurred prior to the issuance of the previous audit report, the

firm shall comply with the provisions of Part 4A in evaluating the

significance of the breach and its impact on the firm’s objectivity and its

ability to issue an audit report in the current period.

R400.87 The firm shall also:

(a) Consider the impact of the breach, if any, on the firm’s objectivity

in relation to any previously issued audit reports, and the possibility

of withdrawing such audit reports; and

(b) Discuss the matter with those charged with governance.



Documentation

R400.88 In complying with the requirements in paragraphs R400.80 to R400.87, the

firm shall document:

(a) The breach;

(b) The actions taken;

(c) The key decisions made;

(d) All the matters discussed with those charged with governance; and

(e) Any discussions with a professional or regulatory body or oversight

authority.

R400.89 If the firm continues with the audit engagement, it shall document:

(a) The conclusion that, in the firm’s professional judgment, objectivity

has not been compromised; and

(b) The rationale for why the action taken satisfactorily addressed the

consequences of the breach so that the firm could issue an audit

report.



SECTION 410

FEES

Introduction

410.1 Firms are required to comply with the fundamental principles, be

independent and apply the conceptual framework set out in Section 120 to

identify, evaluate and address threats to independence.

410.2 The nature and level of fees or other types of remuneration might create a

self-interest or intimidation threat. This section sets out specific

requirements and application material relevant to applying the conceptual

framework in such circumstances.


Fees – Relative Size

All Audit Clients

410.3 A1 When the total fees generated from an audit client by the firm expressing the

audit opinion represent a large proportion of the total fees of that firm, the

dependence on that client and concern about losing the client create a self-

interest or intimidation threat.

410.3 A2 Factors that are relevant in evaluating the level of such threats include:

The operating structure of the firm.

Whether the firm is well established or new.

The significance of the client qualitatively and/or quantitatively to

the firm.

410.3 A3 An example of an action that might be a safeguard to address such a self-

interest or intimidation threat is increasing the client base in the firm to

reduce dependence on the audit client.

410.3 A4 A self-interest or intimidation threat is also created when the fees generated

by a firm from an audit client represent a large proportion of the revenue of

one partner or one office of the firm.



the partner or office.



The extent to which the compensation of the partner, or the partners

in the office, is dependent upon the fees generated from the client.

410.3 A6 Examples of actions that might be safeguards to address such self-interest or

intimidation threats include:

Increasing the client base of the partner or the office to reduce

dependence on the audit client.

Having an appropriate reviewer who did not take part in the audit

engagement review the work.

Audit Clients that are Public Interest Entities

R410.4 Where an audit client is a public interest entity and, for two consecutive

years, the total fees from the client and its related entities represent more

than 15% of the total fees received by the firm expressing the opinion on the

financial statements of the client, the firm shall:

(a) Disclose to those charged with governance of the audit client the fact

that the total of such fees represents more than 15% of the total fees

received by the firm; and

(b) Discuss whether either of the following actions might be a safeguard

to address the threat created by the total fees received by the firm

from the client, and if so, apply it:

(i) Prior to the audit opinion being issued on the second year’s

financial statements, a chartered accountant, who is not a

member of the firm expressing the opinion on the financial

statements, performs an engagement quality control review of

that engagement; or a professional body performs a review of

that engagement that is equivalent to an engagement quality

control review (“a pre-issuance review”); or

(ii) After the audit opinion on the second year’s financial statements

has been issued, and before the audit opinion being issued on

the third year’s financial statements, a chartered accountant,

who is not a member of the firm expressing the opinion on the

financial statements, or a professional body performs a review

of the second year’s audit that is equivalent to an engagement

quality control review (“a post-issuance review”).

R410.5 When the total fees described in paragraph R410.4 significantly exceed

15%, the firm shall determine whether the level of the threat is such that a

post-issuance review would not reduce the threat to an acceptable level. If

so, the firm shall have a pre-issuance review performed.



R410.6 If the fees described in paragraph R410.4 continue to exceed 15%, the firm

shall each year:

(a) Disclose to and discuss with those charged with governance the

matters set out in paragraph R410.4; and

(b) Comply with paragraphs R410.4(b) and R410.5.

Fees – Overdue

410.7 A1 A self-interest threat might be created if a significant part of fees is not paid

before the audit report for the following year is issued. It is generally

expected that the firm will require payment of such fees before such audit

report is issued. The requirements and application material set out in Section

511 with respect to loans and guarantees might also apply to situations where

such unpaid fees exist.


threat include:

Obtaining partial payment of overdue fees.

Having an appropriate reviewer who did not take part in the audit

engagement review the work performed.

R410.8 When a significant part of fees due from an audit client remains unpaid for

a long time, the firm shall determine:

(a) Whether the overdue fees might be equivalent to a loan to the client;

and

(b) Whether it is appropriate for the firm to be re-appointed or continue

the audit engagement.

Contingent Fees

410.9 A1 Contingent fees are fees calculated on a predetermined basis relating to the

outcome of a transaction or the result of the services performed. A

contingent fee charged through an intermediary is an example of an indirect

contingent fee. In this section, a fee is not regarded as being contingent if

established by a court or other public authority.

R410.10 A firm shall not charge directly or indirectly a contingent fee for an audit

engagement.

R410.11 A firm or network firm shall not charge directly or indirectly a contingent

fee for a non-assurance service provided to an audit client, if:



(a) The fee is charged by the firm expressing the opinion on the financial

statements and the fee is material or expected to be material to that

firm;

(b) The fee is charged by a network firm that participates in a significant

part of the audit and the fee is material or expected to be material to

that firm; or

(c) The outcome of the non-assurance service, and therefore the amount

of the fee, is dependent on a future or contemporary judgment

related to the audit of a material amount in the financial statements.



SECTION 411

COMPENSATION AND EVALUATION POLICIES

Introduction




411.2 A firm’s evaluation or compensation policies might create a self-interest

threat. This section sets out specific requirements and application material



General

411.3 A1 When an audit team member for a particular audit client is evaluated on or

compensated for selling non-assurance services to that audit client, the level

of the self-interest threat will depend on:

(a) What proportion of the compensation or evaluation is based on the

sale of such services;

(b) The role of the individual on the audit team; and

(c) Whether the sale of such non-assurance services influences

promotion decisions.

411.3 A2 Examples of actions that might eliminate such a self-interest threat include:

Revising the compensation plan or evaluation process for that

individual.

Removing that individual from the audit team.


interest threat is having an appropriate reviewer review the work of the audit

team member.

R411.4 A firm shall not evaluate or compensate a key audit partner based on that

partner’s success in selling non-assurance services to the partner’s audit

client. This requirement does not preclude normal profit-sharing

arrangements between partners of a firm.



SECTION 420

GIFTS AND HOSPITALITY

Introduction




420.2 Accepting gifts and hospitality from an audit client might create a self-

interest, familiarity or intimidation threat. This section sets out a specific

requirement and application material relevant to applying the conceptual


Requirement and Application Material

R420.3 A firm, network firm or an audit team member shall not accept gifts and

hospitality from an audit client, unless the value is trivial and

inconsequential.

420.3 A1 Where a firm, network firm or audit team member is offering or accepting

an inducement to or from an audit client, the requirements and application

material set out in Section 340 apply and non-compliance with these

requirements might create threats to independence.

420.3 A2 The requirements set out in Section 340 relating to offering or accepting

inducements do not allow a firm, network firm or audit team member to

accept gifts and hospitality where the intent is to improperly influence

behavior even if the value is trivial and inconsequential.



SECTION 430

ACTUAL OR THREATENED LITIGATION

Introduction




430.2 When litigation with an audit client occurs, or appears likely, self-interest

and intimidation threats are created. This section sets out specific application


circumstances.


General

430.3 A1 The relationship between client management and audit team members must

be characterized by complete candor and full disclosure regarding all aspects

of a client’s operations. Adversarial positions might result from actual or

threatened litigation between an audit client and the firm, a network firm or

an audit team member. Such adversarial positions might affect

management’s willingness to make complete disclosures and create self-

interest and intimidation threats.


The materiality of the litigation.

Whether the litigation relates to a prior audit engagement.

430.3 A3 If the litigation involves an audit team member, an example of an action that

might eliminate such self-interest and intimidation threats is removing that

individual from the audit team.

430.3 A4 An example of an action that might be a safeguard to address such self-

interest and intimidation threats is to have an appropriate reviewer review

the work performed.



SECTION 510

FINANCIAL INTERESTS

Introduction




510.2 Holding a financial interest in an audit client might create a self-interest




General

510.3 A1 A financial interest might be held directly or indirectly through an

intermediary such as a collective investment vehicle, an estate or a trust.

When a beneficial owner has control over the intermediary or ability to

influence its investment decisions, the Code defines that financial interest to

be direct. Conversely, when a beneficial owner has no control over the

intermediary or ability to influence its investment decisions, the Code

defines that financial interest to be indirect.

510.3 A2 This section contains references to the “materiality” of a financial interest.

In determining whether such an interest is material to an individual, the

combined net worth of the individual and the individual’s immediate family

members may be taken into account.

510.3 A3 Factors that are relevant in evaluating the level of a self-interest threat

created by holding a financial interest in an audit client include:

The role of the individual holding the financial interest.

Whether the financial interest is direct or indirect.

The materiality of the financial interest.

Financial Interests Held by the Firm, a Network Firm, Audit Team Members and

Others

R510.4 Subject to paragraph R510.5, a direct financial interest or a material indirect

financial interest in the audit client shall not be held by:

(a) The firm or a network firm;



(b) An audit team member, or any of that individual’s immediate family;

(c) Any other partner in the office in which an engagement partner

practices in connection with the audit engagement, or any of that

other partner’s immediate family; or

(d) Any other partner or managerial employee who provides non-audit

services to the audit client, except for any whose involvement is

minimal, or any of that individual’s immediate family.

510.4 A1 The office in which the engagement partner practices in connection with an

audit engagement is not necessarily the office to which that partner is

assigned. When the engagement partner is located in a different office from

that of the other audit team members, professional judgment is needed to

determine the office in which the partner practices in connection with the

engagement.

R510.5 As an exception to paragraph R510.4, an immediate family member

identified in subparagraphs R510.4(c) or (d) may hold a direct or material

indirect financial interest in an audit client, provided that:

(a) The family member received the financial interest because of

employment rights, for example through pension or share option

plans, and, when necessary, the firm addresses the threat created by

the financial interest; and

(b) The family member disposes of or forfeits the financial interest as

soon as practicable when the family member has or obtains the right

to do so, or in the case of a stock option, when the family member

obtains the right to exercise the option.

Financial Interests in an Entity Controlling an Audit Client

R510.6 When an entity has a controlling interest in an audit client and the client is

material to the entity, neither the firm, nor a network firm, nor an audit team

member, nor any of that individual’s immediate family shall hold a direct or

material indirect financial interest in that entity.

Financial Interests Held as Trustee

R510.7 Paragraph R510.4 shall also apply to a financial interest in an audit client

held in a trust for which the firm, network firm or individual acts as trustee,

unless:

(a) None of the following is a beneficiary of the trust: the trustee, the

audit team member or any of that individual’s immediate family, the

firm or a network firm;



(b) The interest in the audit client held by the trust is not material to the

trust;

(c) The trust is not able to exercise significant influence over the audit

client; and

(d) None of the following can significantly influence any investment

decision involving a financial interest in the audit client: the trustee,

the audit team member or any of that individual’s immediate family,

the firm or a network firm.

Financial Interests in Common with the Audit Client

R510.8 (a) A firm, or a network firm, or an audit team member, or any of that

individual’s immediate family shall not hold a financial interest in

an entity when an audit client also has a financial interest in that

entity, unless:

(i) The financial interests are immaterial to the firm, the network

firm, the audit team member and that individual’s immediate

family member and the audit client, as applicable; or

(ii) The audit client cannot exercise significant influence over the

entity.

(b) Before an individual who has a financial interest described in

paragraph R510.8(a) can become an audit team member, the

individual or that individual’s immediate family member shall

either:

(i) Dispose of the interest; or

(ii) Dispose of enough of the interest so that the remaining interest

is no longer material.

Financial Interests Received Unintentionally

R510.9 If a firm, a network firm or a partner or employee of the firm or a network

firm, or any of that individual’s immediate family, receives a direct financial

interest or a material indirect financial interest in an audit client by way of

an inheritance, gift, as a result of a merger or in similar circumstances and

the interest would not otherwise be permitted to be held under this section,

then:

(a) If the interest is received by the firm or a network firm, or an audit

team member or any of that individual’s immediate family, the

financial interest shall be disposed of immediately, or enough of an



indirect financial interest shall be disposed of so that the remaining

interest is no longer material; or

(b) (i) If the interest is received by an individual who is not an audit

team member, or by any of that individual’s immediate

family, the financial interest shall be disposed of as soon as

possible, or enough of an indirect financial interest shall be

disposed of so that the remaining interest is no longer

material; and

(ii) Pending the disposal of the financial interest, when necessary

the firm shall address the threat created.

Financial Interests – Other Circumstances

Immediate Family

510.10 A1 A self-interest, familiarity, or intimidation threat might be created if an audit

team member, or any of that individual’s immediate family, or the firm or a

network firm has a financial interest in an entity when a director or officer

or controlling owner of the audit client is also known to have a financial

interest in that entity.


The role of the individual on the audit team.

Whether ownership of the entity is closely or widely held.

Whether the interest allows the investor to control or significantly

influence the entity.


510.10 A3 An example of an action that might eliminate such a self-interest, familiarity,

or intimidation threat is removing the audit team member with the financial

interest from the audit team.



team member.

Close Family

510.10 A5 A self-interest threat might be created if an audit team member knows that a

close family member has a direct financial interest or a material indirect

financial interest in the audit client.




The nature of the relationship between the audit team member and

the close family member.


The materiality of the financial interest to the close family member.


Having the close family member dispose, as soon as practicable, of

all of the financial interest or dispose of enough of an indirect

financial interest so that the remaining interest is no longer material.

Removing the individual from the audit team.



team member.

Other Individuals

510.10 A9 A self-interest threat might be created if an audit team member knows that a

financial interest in the audit client is held by individuals such as:

Partners and professional employees of the firm or network firm,

apart from those who are specifically not permitted to hold such

financial interests by paragraph R510.4, or their immediate family

members.

Individuals with a close personal relationship with an audit team

member.


The firm’s organizational, operating and reporting structure.

The nature of the relationship between the individual and the audit

team member.

510.10 A11 An example of an action that might eliminate such a self-interest threat is

removing the audit team member with the personal relationship from the

audit team.




threat include:

Excluding the audit team member from any significant decision-

making concerning the audit engagement.

Having an appropriate reviewer review the work of the audit team

member.

Retirement Benefit Plan of a Firm or Network Firm

510.10 A13 A self-interest threat might be created if a retirement benefit plan of a firm

or a network firm holds a direct or material indirect financial interest in an

audit client.



SECTION 511

LOANS AND GUARANTEES

Introduction




511.2 A loan or a guarantee of a loan with an audit client might create a self-interest




General

511.3 A1 This section contains references to the “materiality” of a loan or guarantee.

In determining whether such a loan or guarantee is material to an individual,

the combined net worth of the individual and the individual’s immediate

family members may be taken into account.

Loans and Guarantees with an Audit Client

R511.4 A firm, a network firm, an audit team member, or any of that individual’s

immediate family shall not make or guarantee a loan to an audit client unless

the loan or guarantee is immaterial to:

(a) The firm, the network firm or the individual making the loan or

guarantee, as applicable; and

(b) The client.

Loans and Guarantees with an Audit Client that is a Bank or Similar Institution


immediate family shall not accept a loan, or a guarantee of a loan, from an

audit client that is a bank or a similar institution unless the loan or guarantee

is made under normal lending procedures, terms and conditions.

511.5 A1 Examples of loans include mortgages, bank overdrafts, car loans, and credit

card balances.

511.5 A2 Even if a firm or network firm receives a loan from an audit client that is a

bank or similar institution under normal lending procedures, terms and

conditions, the loan might create a self-interest threat if it is material to the

audit client or firm receiving the loan.




interest threat is having the work reviewed by an appropriate reviewer, who

is not an audit team member, from a network firm that is not a beneficiary

of the loan.

Deposits or Brokerage Accounts


immediate family shall not have deposits or a brokerage account with an

audit client that is a bank, broker or similar institution, unless the deposit or

account is held under normal commercial terms.

Loans and Guarantees with an Audit Client that is Not a Bank or Similar Institution


immediate family shall not accept a loan from, or have a borrowing

guaranteed by, an audit client that is not a bank or similar institution, unless

the loan or guarantee is immaterial to:

(a) The firm, the network firm, or the individual receiving the loan or

guarantee, as applicable; and

(b) The client



SECTION 520

BUSINESS RELATIONSHIPS

Introduction




520.2 A close business relationship with an audit client or its management might

create a self-interest or intimidation threat. This section sets out specific




General

520.3 A1 This section contains references to the “materiality” of a financial interest

and the “significance” of a business relationship. In determining whether

such a financial interest is material to an individual, the combined net worth

of the individual and the individual’s immediate family members may be

taken into account.

520.3 A2 Examples of a close business relationship arising from a commercial

relationship or common financial interest include:

Having a financial interest in a joint venture with either the client or

a controlling owner, director or officer or other individual who

performs senior managerial activities for that client.

Arrangements to combine one or more services or products of the

firm or a network firm with one or more services or products of the

client and to market the package with reference to both parties.

Distribution or marketing arrangements under which the firm or a

network firm distributes or markets the client’s products or services,

or the client distributes or markets the firm or a network firm’s

products or services.



Firm, Network Firm, Audit Team Member or Immediate Family Business

Relationships

R520.4 A firm, a network firm or an audit team member shall not have a close

business relationship with an audit client or its management unless any

financial interest is immaterial and the business relationship is insignificant

to the client or its management and the firm, the network firm or the audit

team member, as applicable.

520.4 A1 A self-interest or intimidation threat might be created if there is a close

business relationship between the audit client or its management and the

immediate family of an audit team member.

Common Interests in Closely-Held Entities


immediate family shall not have a business relationship involving the

holding of an interest in a closely-held entity when an audit client or a

director or officer of the client, or any group thereof, also holds an interest

in that entity, unless:

(a) The business relationship is insignificant to the firm, the network

firm, or the individual as applicable, and the client;

(b) The financial interest is immaterial to the investor or group of

investors; and

(c) The financial interest does not give the investor, or group of

investors, the ability to control the closely-held entity.

Buying Goods or Services

520.6 A1 The purchase of goods and services from an audit client by a firm, a network

firm, an audit team member, or any of that individual’s immediate family

does not usually create a threat to independence if the transaction is in the

normal course of business and at arm’s length. However, such transactions

might be of such a nature and magnitude that they create a self-interest

threat.


Eliminating or reducing the magnitude of the transaction.

Removing the individual from the audit team.



SECTION 521

FAMILY AND PERSONAL RELATIONSHIPS

Introduction




521.2 Family or personal relationships with client personnel might create a self-

interest, familiarity or intimidation threat. This section sets out specific




General

521.3 A1 A self-interest, familiarity or intimidation threat might be created by family

and personal relationships between an audit team member and a director or

officer or, depending on their role, certain employees of the audit client.


The individual’s responsibilities on the audit team.

The role of the family member or other individual within the client,

and the closeness of the relationship.

Immediate Family of an Audit Team Member

521.4 A1 A self-interest, familiarity or intimidation threat is created when an

immediate family member of an audit team member is an employee in a

position to exert significant influence over the client’s financial position,

financial performance or cash flows.


The position held by the immediate family member.

The role of the audit team member.

521.4 A3 An example of an action that might eliminate such a self-interest, familiarity

or intimidation threat is removing the individual from the audit team.




interest, familiarity or intimidation threat is structuring the responsibilities

of the audit team so that the audit team member does not deal with matters

that are within the responsibility of the immediate family member.

R521.5 An individual shall not participate as an audit team member when any of that

individual’s immediate family:

(a) Is a director or officer of the audit client;

(b) Is an employee in a position to exert significant influence over the

preparation of the client’s accounting records or the financial

statements on which the firm will express an opinion; or

(c) Was in such position during any period covered by the engagement

or the financial statements.

Close Family of an Audit Team Member

521.6 A1 A self-interest, familiarity or intimidation threat is created when a close

family member of an audit team member is:

(a) A director or officer of the audit client; or

(b) An employee in a position to exert significant influence over the


statements on which the firm will express an opinion.


The nature of the relationship between the audit team member and

the close family member.

The position held by the close family member.







that are within the responsibility of the close family member.



Other Close Relationships of an Audit Team Member

R521.7 An audit team member shall consult in accordance with firm policies and

procedures if the audit team member has a close relationship with an

individual who is not an immediate or close family member, but who is:

(a) A director or officer of the audit client; or




521.7 A1 Factors that are relevant in evaluating the level of a self-interest, familiarity

or intimidation threat created by such a relationship include:

The nature of the relationship between the individual and the audit

team member.

The position the individual holds with the client.







that are within the responsibility of the individual with whom the audit team

member has a close relationship.

Relationships of Partners and Employees of the Firm

R521.8 Partners and employees of the firm shall consult in accordance with firm

policies and procedures if they are aware of a personal or family relationship

between:

(a) A partner or employee of the firm or network firm who is not an

audit team member; and

(b) A director or officer of the audit client or an employee of the audit

client in a position to exert significant influence over the preparation

of the client’s accounting records or the financial statements on

which the firm will express an opinion.




or intimidation threat created by such a relationship include:

The nature of the relationship between the partner or employee of

the firm and the director or officer or employee of the client.

The degree of interaction of the partner or employee of the firm with

the audit team.

The position of the partner or employee within the firm.


521.8 A2 Examples of actions that might be safeguards to address such self-interest,

familiarity or intimidation threats include:

Structuring the partner’s or employee’s responsibilities to reduce

any potential influence over the audit engagement.

Having an appropriate reviewer review the relevant audit work

performed



SECTION 522

RECENT SERVICE WITH AN AUDIT CLIENT

Introduction

522.1 Firms are required to comply with the fundamental principles, be independent

and apply the conceptual framework set out in Section 120 to identify, evaluate

and address threats to independence.

522.2 If an audit team member has recently served as a director or officer, or

employee of the audit client, a self-interest, self-review or familiarity threat

might be created. This section sets out specific requirements and application

material relevant to applying the conceptual framework in such circumstances.


Service During Period Covered by the Audit Report

R522.3 The audit team shall not include an individual who, during the period covered

by the audit report:

(a) Had served as a director or officer of the audit client; or

(b) Was an employee in a position to exert significant influence over the

preparation of the client’s accounting records or the financial statements

on which the firm will express an opinion.

Service Prior to Period Covered by the Audit Report

522.4 A1 A self-interest, self-review or familiarity threat might be created if, before the

period covered by the audit report, an audit team member:

(a) Had served as a director or officer of the audit client; or


preparation of the client’s accounting records or financial statements on


For example, a threat would be created if a decision made or work performed

by the individual in the prior period, while employed by the client, is to be

evaluated in the current period as part of the current audit engagement.




The position the individual held with the client.

The length of time since the individual left the client.



interest, self-review or familiarity threat is having an appropriate reviewer

review the work performed by the audit team member.



SECTION 523

SERVING AS A DIRECTOR OR OFFICER OF AN AUDIT CLIENT

Introduction




523.2 Serving as a director or officer of an audit client creates self-review and self-

interest threats. This section sets out specific requirements and application


circumstances.


Service as Director or Officer

R523.3 A partner or employee of the firm or a network firm shall not serve as a

director or officer of an audit client of the firm.

Service as Company Secretary

R523.4 A partner or employee of the firm or a network firm shall not serve as

Company Secretary for an audit client of the firm, unless:

(a) This practice is specifically permitted under local law, professional

rules or practice;

(b) Management makes all relevant decisions; and

(c) The duties and activities performed are limited to those of a routine

and administrative nature, such as preparing minutes and

maintaining statutory returns.

523.4 A1 The position of Company Secretary has different implications in different

jurisdictions. Duties might range from: administrative duties (such as

personnel management and the maintenance of company records and

registers) to duties as diverse as ensuring that the company complies with

regulations or providing advice on corporate governance matters. Usually

this position is seen to imply a close association with the entity. Therefore,

a threat is created if a partner or employee of the firm or a network firm

serves as Company Secretary for an audit client. (More information on

providing non-assurance services to an audit client is set out in Section 600,

Provision of Non-assurance Services to an Audit Client).



SECTION 524

EMPLOYMENT WITH AN AUDIT CLIENT

Introduction




524.2 Employment relationships with an audit client might create a self-interest,

familiarity or intimidation threat. This section sets out specific requirements

and application material relevant to applying the conceptual framework in

such circumstances.


All Audit Clients

524.3 A1 A familiarity or intimidation threat might be created if any of the following

individuals have been an audit team member or partner of the firm or a

network firm:

A director or officer of the audit client.

An employee in a position to exert significant influence over the



Former Partner or Audit Team Member Restrictions

R524.4 The firm shall ensure that no significant connection remains between the

firm or a network firm and:

(a) A former partner who has joined an audit client of the firm; or

(b) A former audit team member who has joined the audit client, if either

has joined the audit client as:

(i) A director or officer; or

(ii) An employee in a position to exert significant influence

over the preparation of the client’s accounting records or

the financial statements on which the firm will express an

opinion.

A significant connection remains between the firm or a network firm and

the individual, unless:



(a) The individual is not entitled to any benefits or payments from the

firm or network firm that are not made in accordance with fixed pre-

determined arrangements;

(b) Any amount owed to the individual is not material to the firm or the

network firm; and

(c) The individual does not continue to participate or appear to

participate in the firm’s or the network firm’s business or

professional activities.

524.4 A1 Even if the requirements of paragraph R524.4 are met, a familiarity or

intimidation threat might still be created.

524.4 A2 A familiarity or intimidation threat might also be created if a former partner

of the firm or network firm has joined an entity in one of the positions

described in paragraph 524.3 A1 and the entity subsequently becomes an

audit client of the firm.


The position the individual has taken at the client.

Any involvement the individual will have with the audit team.

The length of time since the individual was an audit team member

or partner of the firm or network firm.

The former position of the individual within the audit team, firm or

network firm. An example is whether the individual was responsible

for maintaining regular contact with the client’s management or

those charged with governance.

524.4 A4 Examples of actions that might be safeguards to address such familiarity or

intimidation threats include:

Modifying the audit plan.

Assigning to the audit team individuals who have sufficient

experience relative to the individual who has joined the client.

Having an appropriate reviewer review the work of the former audit

team member.



Audit Team Members Entering Employment with a Client

R524.5 A firm or network firm shall have policies and procedures that require audit

team members to notify the firm or network firm when entering employment

negotiations with an audit client.

524.5 A1 A self-interest threat is created when an audit team member participates in

the audit engagement while knowing that the audit team member will, or

might, join the client at some time in the future.


removing the individual from the audit team.


interest threat is having an appropriate reviewer review any significant

judgments made by that individual while on the team.


Key Audit Partners

R524.6 Subject to paragraph R524.8, if an individual who was a key audit partner

with respect to an audit client that is a public interest entity joins the client

as:

(a) A director or officer; or



statements on which the firm will express an opinion,

independence is compromised unless, subsequent to the individual ceasing

to be a key audit partner:

(i) The audit client has issued audited financial statements covering a

period of not less than twelve months; and

(ii) The individual was not an audit team member with respect to the

audit of those financial statements.



Senior or Managing Partner (Chief Executive or Equivalent) of the Firm

R524.7 Subject to paragraph R524.8, if an individual who was the Senior or

Managing Partner (Chief Executive or equivalent) of the firm joins an audit

client that is a public interest entity as:




statements on which the firm will express an opinion,

independence is compromised, unless twelve months have passed since the

individual was the Senior or Managing Partner (Chief Executive or

equivalent) of the firm.

Business Combinations

R524.8 As an exception to paragraphs R524.6 and R524.7, independence is not

compromised if the circumstances set out in those paragraphs arise as a result

of a business combination and:

(a) The position was not taken in contemplation of the business

combination;

(b) Any benefits or payments due to the former partner from the firm or

a network firm have been settled in full, unless made in accordance

with fixed pre-determined arrangements and any amount owed to

the partner is not material to the firm or network firm as applicable;

(c) The former partner does not continue to participate or appear to

participate in the firm’s or network firm’s business or professional

activities; and

(d) The firm discusses the former partner’s position held with the audit

client with those charged with governance.



SECTION 525

TEMPORARY PERSONNEL ASSIGNMENTS

Introduction




525.2 The loan of personnel to an audit client might create a self-review, advocacy

or familiarity threat. This section sets out specific requirements and


circumstances.


General

525.3 A1 Examples of actions that might be safeguards to address threats created by

the loan of personnel by a firm or a network firm to an audit client include:

Conducting an additional review of the work performed by the

loaned personnel might address a self-review threat.

Not including the loaned personnel as an audit team member might

address a familiarity or advocacy threat.

Not giving the loaned personnel audit responsibility for any function

or activity that the personnel performed during the loaned personnel

assignment might address a self-review threat.

525.3 A2 When familiarity and advocacy threats are created by the loan of personnel

by a firm or a network firm to an audit client, such that the firm or the

network firm becomes too closely aligned with the views and interests of

management, safeguards are often not available.

R525.4 A firm or network firm shall not loan personnel to an audit client unless:

(a) Such assistance is provided only for a short period of time;

(b) The personnel are not involved in providing non-assurance services

that would not be permitted under Section 600 and its subsections;

and

(c) The personnel do not assume management responsibilities and the

audit client is responsible for directing and supervising the activities

of the personnel.



SECTION 540

LONG ASSOCIATION OF PERSONNEL (INCLUDING PARTNER ROTATION)

WITH AN AUDIT CLIENT

Introduction




540.2 When an individual is involved in an audit engagement over a long period

of time, familiarity and self-interest threats might be created. This section

sets out requirements and application material relevant to applying the



All Audit Clients

540.3 A1 Although an understanding of an audit client and its environment is

fundamental to audit quality, a familiarity threat might be created as a result

of an individual’s long association as an audit team member with:

(a) The audit client and its operations;

(b) The audit client’s senior management; or

(c) The financial statements on which the firm will express an opinion

or the financial information which forms the basis of the financial

statements.

540.3 A2 A self-interest threat might be created as a result of an individual’s concern

about losing a longstanding client or an interest in maintaining a close

personal relationship with a member of senior management or those charged

with governance. Such a threat might influence the individual’s judgment

inappropriately.

540.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-

interest threats include:

(a) In relation to the individual:

The overall length of the individual’s relationship with the

client, including if such relationship existed while the individual

was at a prior firm.



How long the individual has been an engagement team member,

and the nature of the roles performed.

The extent to which the work of the individual is directed,

reviewed and supervised by more senior personnel.

The extent to which the individual, due to the individual’s

seniority, has the ability to influence the outcome of the audit,

for example, by making key decisions or directing the work of

other engagement team members.

The closeness of the individual’s personal relationship with

senior management or those charged with governance.

The nature, frequency and extent of the interaction between the

individual and senior management or those charged with

governance.

(b) In relation to the audit client:

The nature or complexity of the client’s accounting and

financial reporting issues and whether they have changed.

Whether there have been any recent changes in senior

management or those charged with governance.

Whether there have been any structural changes in the client’s

organization which impact the nature, frequency and extent of

interactions the individual might have with senior management

or those charged with governance.

540.3 A4 The combination of two or more factors might increase or reduce the level

of the threats. For example, familiarity threats created over time by the

increasingly close relationship between an individual and a member of the

client’s senior management would be reduced by the departure of that

member of the client’s senior management.

540.3 A5 An example of an action that might eliminate the familiarity and self-interest

threats created by an individual being involved in an audit engagement over

a long period of time would be rotating the individual off the audit team.


self-interest threats include:

Changing the role of the individual on the audit team or the nature

and extent of the tasks the individual performs.



Having an appropriate reviewer who was not an audit team member

review the work of the individual.

Performing regular independent internal or external quality reviews

of the engagement.

R540.4 If a firm decides that the level of the threats created can only be addressed

by rotating the individual off the audit team, the firm shall determine an

appropriate period during which the individual shall not:

(a) Be a member of the engagement team for the audit engagement;

(b) Provide quality control for the audit engagement; or

(c) Exert direct influence on the outcome of the audit engagement.

The period shall be of sufficient duration to allow the familiarity and self-

interest threats to be addressed. In the case of a public interest entity,

paragraphs R540.5 to R540.20 also apply.


R540.5 Subject to paragraphs R540.7 to R540.9, in respect of an audit of a public

interest entity, an individual shall not act in any of the following roles, or a

combination of such roles, for a period of more than seven cumulative years

unless the law prescribes a shorter period (the “time-on” period):

(a) The engagement partner;

(b) The individual appointed as responsible for the engagement quality

control review; or

(c) Any other key audit partner role.

After the time-on period, the individual shall serve a “cooling-off” period in

accordance with the provisions in paragraphs R540.11 to R540.19.

R540.6 In calculating the time-on period, the count of years shall not be restarted

unless the individual ceases to act in any one of the roles in paragraph

R540.5(a) to (c) for a minimum period. This minimum period is a

consecutive period equal to at least the cooling-off period determined in

accordance with paragraphs R540.11 to R540.13 as applicable to the role in

which the individual served in the year immediately before ceasing such

involvement.

540.6 A1 For example, an individual who served as engagement partner for four years

followed by three years off can only act thereafter as a key audit partner on

the same audit engagement for three further years (making a total of seven



cumulative years). Thereafter, that individual is required to cool off in

accordance with paragraph R540.14.

R540.7 As an exception to paragraph R540.5, key audit partners whose continuity

is especially important to audit quality may, in rare cases due to unforeseen

circumstances outside the firm’s control, and with the concurrence of those

charged with governance, be permitted to serve an additional year as a key

audit partner as long as the threat to independence can be eliminated or

reduced to an acceptable level.

540.7 A1 For example, a key audit partner may remain in that role on the audit team

for up to one additional year in circumstances where, due to unforeseen

events, a required rotation was not possible, as might be the case due to

serious illness of the intended engagement partner. In such circumstances,

this will involve the firm discussing with those charged with governance the

reasons why the planned rotation cannot take place and the need for any

safeguards to reduce any threat created.

R540.8 If an audit client becomes a public interest entity, a firm shall take into

account the length of time an individual has served the audit client as a key

audit partner before the client becomes a public interest entity in determining

the timing of the rotation. If the individual has served the audit client as a

key audit partner for a period of five cumulative years or less when the client

becomes a public interest entity, the number of years the individual may

continue to serve the client in that capacity before rotating off the

engagement is seven years less the number of years already served. As an

exception to paragraph R540.5, if the individual has served the audit client

as a key audit partner for a period of six or more cumulative years when the

client becomes a public interest entity, the individual may continue to serve

in that capacity with the concurrence of those charged with governance for

a maximum of two additional years before rotating off the engagement.

R540.9 When a firm has only a few people with the necessary knowledge and

experience to serve as a key audit partner on the audit of a public interest

entity, rotation of key audit partners might not be possible. As an exception

to paragraph R540.5, if an independent regulatory body in the relevant

jurisdiction has provided an exemption from partner rotation in such

circumstances, an individual may remain a key audit partner for more than

seven years, in accordance with such exemption. This is provided that the

independent regulatory body has specified other requirements which are to

be applied, such as the length of time that the key audit partner may be

exempted from rotation or a regular independent external review.

Other Considerations Relating to the Time-on Period

R540.10 In evaluating the threats created by an individual’s long association with an

audit engagement, a firm shall give particular consideration to the roles



undertaken and the length of an individual’s association with the audit

engagement prior to the individual becoming a key audit partner.

540.10 A1 There might be situations where the firm, in applying the conceptual

framework, concludes that it is not appropriate for an individual who is a

key audit partner to continue in that role even though the length of time

served as a key audit partner is less than seven years.

Cooling-off Period

R540.11 If the individual acted as the engagement partner for seven cumulative years,

the cooling-off period shall be five consecutive years.

R540.12 Where the individual has been appointed as responsible for the engagement

quality control review and has acted in that capacity for seven cumulative

years, the cooling-off period shall be three consecutive years.

R540.13 If the individual has acted as a key audit partner other than in the capacities

set out in paragraphs R540.11 and R540.12 for seven cumulative years, the

cooling-off period shall be two consecutive years.

Service in a combination of key audit partner roles

R540.14 If the individual acted in a combination of key audit partner roles and served

as the engagement partner for four or more cumulative years, the cooling-

off period shall be five consecutive years.

R540.15 Subject to paragraph R540.16(a), if the individual acted in a combination of

key audit partner roles and served as the key audit partner responsible for

the engagement quality control review for four or more cumulative years,

the cooling-off period shall be three consecutive years.

R540.16 If an individual has acted in a combination of engagement partner and

engagement quality control review roles for four or more cumulative years

during the time-on period, the cooling-off period shall:

(a) As an exception to paragraph R540.15, be five consecutive years

where the individual has been the engagement partner for three or

more years; or

(b) Be three consecutive years in the case of any other combination.

R540.17 If the individual acted in any combination of key audit partner roles other

than those addressed in paragraphs R540.14 to R540.16, the cooling-off

period shall be two consecutive years.



Service at a Prior Firm

R540.18 In determining the number of years that an individual has been a key audit

partner as set out in paragraph R540.5, the length of the relationship shall,

where relevant, include time while the individual was a key audit partner on

that engagement at a prior firm.

Shorter Cooling-off Period Established by Law or Regulation

R540.19 Where a legislative or regulatory body (or organization authorized or

recognized by such legislative or regulatory body) has established a cooling-

off period for an engagement partner of less than five consecutive years, the

higher of that period or three years may be substituted for the cooling-off

period of five consecutive years specified in paragraph R540.11, R540.14

and R540.16(a) provided that the applicable time-on period does not exceed

seven years.

Restrictions on Activities During the Cooling-off Period

R540.20 For the duration of the relevant cooling-off period, the individual shall not:

(a) Be an engagement team member or provide quality control for the

audit engagement;

(b) Consult with the engagement team or the client regarding technical

or industry-specific issues, transactions or events affecting the audit

engagement (other than discussions with the engagement team

limited to work undertaken or conclusions reached in the last year

of the individual’s time-on period where this remains relevant to the

audit);

(c) Be responsible for leading or coordinating the professional services

provided by the firm or a network firm to the audit client, or

overseeing the relationship of the firm or a network firm with the

audit client; or

(d) Undertake any other role or activity not referred to above with

respect to the audit client, including the provision of non-assurance

services that would result in the individual:

(i) Having significant or frequent interaction with senior

management or those charged with governance; or

(ii) Exerting direct influence on the outcome of the audit

engagement.

540.20 A1 The provisions of paragraph R540.20 are not intended to prevent the

individual from assuming a leadership role in the firm or a network firm,

such as that of the Senior or Managing Partner (Chief Executive or

equivalent).



SECTION 600

PROVISION OF NON-ASSURANCE SERVICES TO AN AUDIT CLIENT

Introduction


independent, and apply the conceptual framework set out in Section 120 to


600.2 Firms and network firms might provide a range of non-assurance services to

their audit clients, consistent with their skills and expertise. Providing non-

assurance services to audit clients might create threats to compliance with

the fundamental principles and threats to independence.


applying the conceptual framework to identify, evaluate and address threats

to independence when providing non-assurance services to audit clients. The

subsections that follow set out specific requirements and application

material relevant when a firm or network firm provides certain non-

assurance services to audit clients and indicate the types of threats that might

be created as a result. Some of the subsections include requirements that

expressly prohibit a firm or network firm from providing certain services to

an audit client in certain circumstances because the threats created cannot be

addressed by applying safeguards.


General

R600.4 Before a firm or a network firm accepts an engagement to provide a non-

assurance service to an audit client, the firm shall determine whether

providing such a service might create a threat to independence.

600.4 A1 The requirements and application material in this section assist the firm in

analyzing certain types of non-assurance services and the related threats that

might be created if a firm or network firm provides non-assurance services

to an audit client.

600.4 A2 New business practices, the evolution of financial markets and changes in

information technology, are among the developments that make it

impossible to draw up an all-inclusive list of non-assurance services that

might be provided to an audit client. As a result, the Code does not include

an exhaustive list of all non-assurance services that might be provided to an

audit client.



Evaluating Threats

600.5 A1 Factors that are relevant in evaluating the level of threats created by

providing a non-assurance service to an audit client include:

The nature, scope and purpose of the service.

The degree of reliance that will be placed on the outcome of the

service as part of the audit.

The legal and regulatory environment in which the service is

provided.

Whether the outcome of the service will affect matters reflected in

the financial statements on which the firm will express an opinion,

and, if so:

o The extent to which the outcome of the service will have a

material effect on the financial statements.

o The degree of subjectivity involved in determining the

appropriate amounts or treatment for those matters reflected in

the financial statements.

The level of expertise of the client’s management and employees

with respect to the type of service provided.

The extent of the client’s involvement in determining significant

matters of judgment.

The nature and extent of the impact of the service, if any, on the

systems that generate information that forms a significant part of the

client’s:

o Accounting records or financial statements on which the firm

will express an opinion.

o Internal controls over financial reporting.

Whether the client is a public interest entity. For example, providing

a non-assurance service to an audit client that is a public interest

entity might be perceived to result in a higher level of a threat.

600.5 A2 Subsections 601 to 610 include examples of additional factors that are

relevant in evaluating the level of threats created by providing the non-

assurance services set out in those subsections.



Materiality in Relation to Financial Statements

600.5 A3 Subsections 601 to 610 refer to materiality in relation to an audit client’s

financial statements. The concept of materiality in relation to an audit is

addressed in ISA 320, Materiality in Planning and Performing an Audit, and

in relation to a review in ISRE 2400 (Revised), Engagements to Review

Historical Financial Statements. The determination of materiality involves

the exercise of professional judgment and is impacted by both quantitative

and qualitative factors. It is also affected by perceptions of the financial

information needs of users.

Multiple Non-assurance Services Provided to the Same Audit Client

600.5 A4 A firm or network firm might provide multiple non-assurance services to an

audit client. In these circumstances the consideration of the combined effect

of threats created by providing those services is relevant to the firm’s

evaluation of threats.

Addressing Threats

600.6 A1 Subsections 601 to 610 include examples of actions, including safeguards,

that might address threats to independence created by providing those non-

assurance services when threats are not at an acceptable level. Those

examples are not exhaustive.

600.6 A2 Some of the subsections include requirements that expressly prohibit a firm

or network firm from providing certain services to an audit client in certain

circumstances because the threats created cannot be addressed by applying

safeguards.

600.6 A3 Paragraph 120.10 A2 includes a description of safeguards. In relation to

providing non-assurance services to audit clients, safeguards are actions,

individually or in combination, that the firm takes that effectively reduce

threats to independence to an acceptable level. In some situations, when a

threat is created by providing a non-assurance service to an audit client,

safeguards might not be available. In such situations, the application of the

conceptual framework set out in Section 120 requires the firm to decline or

end the non-assurance service or the audit engagement.

Prohibition on Assuming Management Responsibilities

R600.7 A firm or a network firm shall not assume a management responsibility for

an audit client.

600.7 A1 Management responsibilities involve controlling, leading and directing an

entity, including making decisions regarding the acquisition, deployment

and control of human, financial, technological, physical and intangible

resources.



600.7 A2 Providing a non-assurance service to an audit client creates self- review and

self-interest threats if the firm or network firm assumes a management

responsibility when performing the service. Assuming a management

responsibility also creates a familiarity threat and might create an advocacy

threat because the firm or network firm becomes too closely aligned with

the views and interests of management.

600.7 A3 Determining whether an activity is a management responsibility depends on

the circumstances and requires the exercise of professional judgment.

Examples of activities that would be considered a management

responsibility include:

Setting policies and strategic direction.

Hiring or dismissing employees.

Directing and taking responsibility for the actions of employees in

relation to the employees’ work for the entity.

Authorizing transactions.

Controlling or managing bank accounts or investments.

Deciding which recommendations of the firm or network firm or

other third parties to implement.

Reporting to those charged with governance on behalf of

management.

Taking responsibility for:

o The preparation and fair presentation of the financial statements

in accordance with the applicable financial reporting

framework.

o Designing, implementing, monitoring or maintaining internal

control.

600.7 A4 Providing advice and recommendations to assist the management of an audit

client in discharging its responsibilities is not assuming a management

responsibility. (Ref: Para. R600.7 to 600.7 A3).

R600.8 To avoid assuming a management responsibility when providing any non-

assurance service to an audit client, the firm shall be satisfied that client

management makes all judgments and decisions that are the proper

responsibility of management. This includes ensuring that the client’s

management:



(a) Designates an individual who possesses suitable skill, knowledge

and experience to be responsible at all times for the client’s decisions

and to oversee the services. Such an individual, preferably within

senior management, would understand:

(i) The objectives, nature and results of the services; and

(ii) The respective client and firm or network firm responsibilities.

However, the individual is not required to possess the expertise to

perform or re-perform the services.

(b) Provides oversight of the services and evaluates the adequacy of the

results of the service performed for the client’s purpose.

(c) Accepts responsibility for the actions, if any, to be taken arising from

the results of the services.

Providing Non-Assurance Services to an Audit Client that Later Becomes a Public Interest

Entity

R600.9 A non-assurance service provided, either currently or previously, by a firm

or a network firm to an audit client compromises the firm’s independence

when the client becomes a public interest entity unless:

(a) The previous non-assurance service complies with the provisions of

this section that relate to audit clients that are not public interest

entities;

(b) Non-assurance services currently in progress that are not permitted

under this section for audit clients that are public interest entities are

ended before, or as soon as practicable after, the client becomes a

public interest entity; and

(c) The firm addresses threats that are created that are not at an

acceptable level.

Considerations for Certain Related Entities

R600.10 This section includes requirements that prohibit firms and network firms

from assuming management responsibilities or providing certain non-

assurance services to audit clients. As an exception to those requirements, a

firm or network firm may assume management responsibilities or provide

certain non-assurance services that would otherwise be prohibited to the

following related entities of the client on whose financial statements the firm

will express an opinion:

(a) An entity that has direct or indirect control over the client;



(b) An entity with a direct financial interest in the client if that entity has

significant influence over the client and the interest in the client is

material to such entity; or

(c) An entity which is under common control with the client,

provided that all of the following conditions are met:

(i) The firm or a network firm does not express an opinion on the

financial statements of the related entity;

(ii) The firm or a network firm does not assume a management

responsibility, directly or indirectly, for the entity on whose financial

statements the firm will express an opinion;

(iii) The services do not create a self-review threat because the results of

the services will not be subject to audit procedures; and

(iv) The firm addresses other threats created by providing such services

that are not at an acceptable level.

SUBSECTION 601

ACCOUNTING AND BOOKKEEPING SERVICES

Introduction

601.1 Providing accounting and bookkeeping services to an audit client might

create a self-review threat.

601.2 In addition to the specific requirements and application material in this

subsection, the requirements and application material in paragraphs 600.1 to

R600.10 are relevant to applying the conceptual framework when providing

an audit client with accounting and bookkeeping services. This subsection

includes requirements that prohibit firms and network firms from providing

certain accounting and bookkeeping services to audit clients in some

circumstances because the threats created cannot be addressed by applying

safeguards.


All Audit Clients

601.3 A1 Accounting and bookkeeping services comprise a broad range of services

including:

Preparing accounting records and financial statements.



Recording transactions.

Payroll services.

601.3 A2 Management is responsible for the preparation and fair presentation of the

financial statements in accordance with the applicable financial reporting

framework. These responsibilities include:

Determining accounting policies and the accounting treatment in

accordance with those policies.

Preparing or changing source documents or originating data, in

electronic or other form, evidencing the occurrence of a transaction.

Examples include:

o Purchase orders.

o Payroll time records.

o Customer orders.

Originating or changing journal entries.

Determining or approving the account classifications of

transactions.

601.3 A3 The audit process necessitates dialogue between the firm and the

management of the audit client, which might involve:

Applying accounting standards or policies and financial statement

disclosure requirements.

Assessing the appropriateness of financial and accounting control

and the methods used in determining the stated amounts of assets

and liabilities.

Proposing adjusting journal entries.

These activities are considered to be a normal part of the audit process and

do not usually create threats as long as the client is responsible for making

decisions in the preparation of accounting records and financial statements.

601.3 A4 Similarly, the client might request technical assistance on matters such as

resolving account reconciliation problems or analyzing and accumulating

information for regulatory reporting. In addition, the client might request

technical advice on accounting issues such as the conversion of existing



financial statements from one financial reporting framework to another.

Examples include:

Complying with group accounting policies.

Transitioning to a different financial reporting framework such as

International Financial Reporting Standards.

Such services do not usually create threats provided neither the firm nor

network firm assumes a management responsibility for the client.

Accounting and Bookkeeping Services that are Routine or Mechanical

601.4 A1 Accounting and bookkeeping services that are routine or mechanical in

nature require little or no professional judgment. Some examples of these

services are:

Preparing payroll calculations or reports based on client-originated

data for approval and payment by the client.

Recording recurring transactions for which amounts are easily

determinable from source documents or originating data, such as a

utility bill where the client has determined or approved the

appropriate account classification.

Calculating depreciation on fixed assets when the client determines

the accounting policy and estimates of useful life and residual

values.

Posting transactions coded by the client to the general ledger.

Posting client-approved entries to the trial balance.

Preparing financial statements based on information in the client-

approved trial balance and preparing related notes based on client-

approved records.

Audit Clients that are Not Public Interest Entities

R601.5 A firm or a network firm shall not provide to an audit client that is not a

public interest entity accounting and bookkeeping services including

preparing financial statements on which the firm will express an opinion or

financial information which forms the basis of such financial statements,

unless:

(a) The services are of a routine or mechanical nature; and



(b) The firm addresses any threats that are created by providing such

services that are not at an acceptable level.

601.5 A1 Examples of actions that might be safeguards to address a self-review threat

created when providing accounting and bookkeeping services of a routine

and mechanical nature to an audit client include:


service.

Having an appropriate reviewer who was not involved in providing

the service review the audit work or service performed.


R601.6 Subject to paragraph R601.7, a firm or a network firm shall not provide to

an audit client that is a public interest entity accounting and bookkeeping

services including preparing financial statements on which the firm will

express an opinion or financial information which forms the basis of such

financial statements.

R601.7 As an exception to paragraph R601.6, a firm or network firm may provide

accounting and bookkeeping services of a routine or mechanical nature for

divisions or related entities of an audit client that is a public interest entity if

the personnel providing the services are not audit team members and:

(a) The divisions or related entities for which the service is provided are

collectively immaterial to the financial statements on which the firm

will express an opinion; or

(b) The service relates to matters that are collectively immaterial to the

financial statements of the division or related entity.

SUBSECTION 602

ADMINISTRATIVE SERVICES

Introduction

602.1 Providing administrative services to an audit client does not usually create a

threat.

602.2 In addition to the specific application material in this subsection, the

requirements and application material in paragraphs 600.1 to R600.10 are

relevant to applying the conceptual framework when providing

administrative services.




All Audit Clients

602.3 A1 Administrative services involve assisting clients with their routine or

mechanical tasks within the normal course of operations. Such services

require little to no professional judgment and are clerical in nature.

602.3 A2 Examples of administrative services include:

Word processing services.

Preparing administrative or statutory forms for client approval.

Submitting such forms as instructed by the client.

Monitoring statutory filing dates, and advising an audit client of

those dates.

SUBSECTION 603

VALUATION SERVICES

Introduction

603.1 Providing valuation services to an audit client might create a self-review or

advocacy threat.




valuation services to an audit client. This subsection includes requirements

that prohibit firms and network firms from providing certain valuation

services to audit clients in some circumstances because the threats created

cannot be addressed by applying safeguards.


All Audit Clients

603.3 A1 A valuation comprises the making of assumptions with regard to future

developments, the application of appropriate methodologies and techniques,

and the combination of both to compute a certain value, or range of values,

for an asset, a liability or for a business as a whole.



603.3 A2 If a firm or network firm is requested to perform a valuation to assist an audit

client with its tax reporting obligations or for tax planning purposes and the

results of the valuation will not have a direct effect on the financial

statements, the application material set out in paragraphs 604.9 A1 to 604.9

A5, relating to such services, applies.

603.3 A3 Factors that are relevant in evaluating the level of self-review or advocacy

threats created by providing valuation services to an audit client include:

The use and purpose of the valuation report.

Whether the valuation report will be made public.

The extent of the client’s involvement in determining and approving

the valuation methodology and other significant matters of

judgment.

The degree of subjectivity inherent in the item for valuations

involving standard or established methodologies.

Whether the valuation will have a material effect on the financial

statements.

The extent and clarity of the disclosures related to the valuation in


The degree of dependence on future events of a nature that might

create significant volatility inherent in the amounts involved.

603.3 A4 Examples of actions that might be safeguards to address threats include:


service might address self-review or advocacy threats.


the service review the audit work or service performed might

address a self-review threat.


R603.4 A firm or a network firm shall not provide a valuation service to an audit

client that is not a public interest entity if:

(a) The valuation involves a significant degree of subjectivity; and

(b) The valuation will have a material effect on the financial statements




603.4 A1 Certain valuations do not involve a significant degree of subjectivity. This

is likely to be the case when the underlying assumptions are either

established by law or regulation, or are widely accepted and when the

techniques and methodologies to be used are based on generally accepted

standards or prescribed by law or regulation. In such circumstances, the

results of a valuation performed by two or more parties are not likely to be

materially different.


R603.5 A firm or a network firm shall not provide a valuation service to an audit

client that is a public interest entity if the valuation service would have a

material effect, individually or in the aggregate, on the financial statements


SUBSECTION 604

TAX SERVICES

Introduction

604.1 Providing tax services to an audit client might create a self-review or

advocacy threat.




a tax service to an audit client. This subsection includes requirements that

prohibit firms and network firms from providing certain tax services to audit

clients in some circumstances because the threats created cannot be

addressed by applying safeguards.


All Audit Clients

604.3 A1 Tax services comprise a broad range of services, including activities such

as:

Tax return preparation.

Tax calculations for the purpose of preparing the accounting entries.

Tax planning and other tax advisory services.

Tax services involving valuations.



Assistance in the resolution of tax disputes.

While this subsection deals with each type of tax service listed above under

separate headings, in practice, the activities involved in providing tax

services are often inter-related.


providing any tax service to an audit client include:

The particular characteristics of the engagement.

The level of tax expertise of the client’s employees.

The system by which the tax authorities assess and administer the

tax in question and the role of the firm or network firm in that

process.

The complexity of the relevant tax regime and the degree of

judgment necessary in applying it.

Tax Return Preparation

All Audit Clients

604.4 A1 Providing tax return preparation services does not usually create a threat.

604.4 A2 Tax return preparation services involve:

Assisting clients with their tax reporting obligations by drafting and

compiling information, including the amount of tax due (usually on

standardized forms) required to be submitted to the applicable tax

authorities.

Advising on the tax return treatment of past transactions and

responding on behalf of the audit client to the tax authorities’

requests for additional information and analysis (for example,

providing explanations of and technical support for the approach

being taken).

604.4 A3 Tax return preparation services are usually based on historical information

and principally involve analysis and presentation of such historical

information under existing tax law, including precedents and established

practice. Further, the tax returns are subject to whatever review or approval

process the tax authority considers appropriate.



Tax Calculations for the Purpose of Preparing Accounting Entries

All Audit Clients

604.5 A1 Preparing calculations of current and deferred tax liabilities (or assets) for

an audit client for the purpose of preparing accounting entries that will be

subsequently audited by the firm creates a self-review threat.

604.5 A2 In addition to the factors in paragraph 604.3 A2, a factor that is relevant in

evaluating the level of the threat created when preparing such calculations

for an audit client is whether the calculation might have a material effect on

the financial statements on which the firm will express an opinion.


604.5 A3 Examples of actions that might be safeguards to address such a self-review

threat when the audit client is not a public interest entity include:


service.


the service review the audit work or service performed.


R604.6 A firm or a network firm shall not prepare tax calculations of current and

deferred tax liabilities (or assets) for an audit client that is a public interest

entity for the purpose of preparing accounting entries that are material to the

financial statements on which the firm will express an opinion.

604.6 A1 The examples of actions that might be safeguards in paragraph 604.5 A3 to

address self-review threats are also applicable when preparing tax

calculations of current and deferred tax liabilities (or assets) to an audit client

that is a public interest entity that are immaterial to the financial statements


Tax Planning and Other Tax Advisory Services

All Audit Clients

604.7 A1 Providing tax planning and other tax advisory services might create a self-

review or advocacy threat.

604.7 A2 Tax planning or other tax advisory services comprise a broad range of

services, such as advising the client how to structure its affairs in a tax

efficient manner or advising on the application of a new tax law or

regulation.



604.7 A3 In addition to paragraph 604.3 A2, factors that are relevant in evaluating the

level of self-review or advocacy threats created by providing tax planning

and other tax advisory services to audit clients include:

The degree of subjectivity involved in determining the appropriate

treatment for the tax advice in the financial statements.

Whether the tax treatment is supported by a private ruling or has

otherwise been cleared by the tax authority before the preparation of


For example, whether the advice provided as a result of the tax

planning and other tax advisory services:

o Is clearly supported by a tax authority or other precedent.

o Is an established practice.

o Has a basis in tax law that is likely to prevail.

The extent to which the outcome of the tax advice will have a

material effect on the financial statements.

Whether the effectiveness of the tax advice depends on the

accounting treatment or presentation in the financial statements and

there is doubt as to the appropriateness of the accounting treatment

or presentation under the relevant financial reporting framework.




Having an appropriate reviewer, who was not involved in providing



Obtaining pre-clearance from the tax authorities might address self-

review or advocacy threats.

When Effectiveness of Tax Advice Is Dependent on a Particular Accounting Treatment or

Presentation

R604.8 A firm or a network firm shall not provide tax planning and other tax

advisory services to an audit client when the effectiveness of the tax advice

depends on a particular accounting treatment or presentation in the financial

statements and:



(a) The audit team has reasonable doubt as to the appropriateness of the

related accounting treatment or presentation under the relevant

financial reporting framework; and

(b) The outcome or consequences of the tax advice will have a material

effect on the financial statements on which the firm will express an

opinion.

Tax Services Involving Valuations

All Audit Clients

604.9 A1 Providing tax valuation services to an audit client might create a self-review

or advocacy threat.

604.9 A2 A firm or a network firm might perform a valuation for tax purposes only,

where the result of the valuation will not have a direct effect on the financial

statements (that is, the financial statements are only affected through

accounting entries related to tax). This would not usually create threats if the

effect on the financial statements is immaterial or the valuation is subject to

external review by a tax authority or similar regulatory authority.

604.9 A3 If the valuation that is performed for tax purposes is not subject to an external

review and the effect is material to the financial statements, in addition to

paragraph 604.3 A2, the following factors are relevant in evaluating the level

of self-review or advocacy threats created by providing those services to an

audit client:

The extent to which the valuation methodology is supported by tax

law or regulation, other precedent or established practice.

The degree of subjectivity inherent in the valuation.

The reliability and extent of the underlying data.







Obtaining pre-clearance from the tax authorities might address self-

review or advocacy threats.



604.9 A5 A firm or network firm might also perform a tax valuation to assist an audit

client with its tax reporting obligations or for tax planning purposes where

the result of the valuation will have a direct effect on the financial

statements. In such situations, the requirements and application material set

out in Subsection 603 relating to valuation services apply.

Assistance in the Resolution of Tax Disputes

All Audit Clients

604.10 A1 Providing assistance in the resolution of tax disputes to an audit client might

create a self-review or advocacy threat.

604.10 A2 A tax dispute might reach a point when the tax authorities have notified an

audit client that arguments on a particular issue have been rejected and either

the tax authority or the client refers the matter for determination in a formal

proceeding, for example, before a public tribunal or court.

604.10 A3 In addition to paragraph 604.3 A2, factors that are relevant in evaluating the

level of self-review or advocacy threats created by assisting an audit client

in the resolution of tax disputes include:

The role management plays in the resolution of the dispute.

The extent to which the outcome of the dispute will have a material

effect on the financial statements on which the firm will express an

opinion.

Whether the advice that was provided is the subject of the tax

dispute.

The extent to which the matter is supported by tax law or regulation,

other precedent, or established practice.

Whether the proceedings are conducted in public.





the service review the audit work or the service performed might




Resolution of Tax Matters Involving Acting as an Advocate

R604.11 A firm or a network firm shall not provide tax services that involve assisting

in the resolution of tax disputes to an audit client if:

(a) The services involve acting as an advocate for the audit client before

a public tribunal or court in the resolution of a tax matter; and

(b) The amounts involved are material to the financial statements on


604.11 A1 Paragraph R604.11 does not preclude a firm or network firm from having a

continuing advisory role in relation to the matter that is being heard before

a public tribunal or court, for example:

Responding to specific requests for information.

Providing factual accounts or testimony about the work performed.

Assisting the client in analyzing the tax issues related to the matter.

604.11 A2 What constitutes a “public tribunal or court” depends on how tax

proceedings are heard in the particular jurisdiction.

SUBSECTION 605

INTERNAL AUDIT SERVICES

Introduction

605.1 Providing internal audit services to an audit client might create a self- review

threat.




an internal audit service to an audit client. This subsection includes

requirements that prohibit firms and network firms from providing certain

internal audit services to audit clients in some circumstances because the

threats created cannot be addressed by applying safeguards.




All Audit Clients

605.3 A1 Internal audit services involve assisting the audit client in the performance

of its internal audit activities. Internal audit activities might include:

Monitoring of internal control – reviewing controls, monitoring their

operation and recommending improvements to them.

Examining financial and operating information by:

○ Reviewing the means used to identify, measure, classify and

report financial and operating information.

○ Inquiring specifically into individual items including detailed

testing of transactions, balances and procedures.

Reviewing the economy, efficiency and effectiveness of operating

activities including non-financial activities of an entity.

Reviewing compliance with:

○ Laws, regulations and other external requirements.

○ Management policies, directives and other internal

requirements.

605.3 A2 The scope and objectives of internal audit activities vary widely and depend

on the size and structure of the entity and the requirements of management

and those charged with governance.

R605.4 When providing an internal audit service to an audit client, the firm shall be

satisfied that:

(a) The client designates an appropriate and competent resource,

preferably within senior management, to:

(i) Be responsible at all times for internal audit activities; and

(ii) Acknowledge responsibility for designing, implementing,

monitoring and maintaining internal control.

(b) The client’s management or those charged with governance reviews,

assesses and approves the scope, risk and frequency of the internal

audit services;



(c) The client’s management evaluates the adequacy of the internal

audit services and the findings resulting from their performance;

(d) The client’s management evaluates and determines which

recommendations resulting from internal audit services to

implement and manages the implementation process; and

(e) The client’s management reports to those charged with governance

the significant findings and recommendations resulting from the

internal audit services.

605.4 A1 Paragraph R600.7 precludes a firm or a network firm from assuming a

management responsibility. Performing a significant part of the client’s

internal audit activities increases the possibility that firm or network firm

personnel providing internal audit services will assume a management

responsibility.

605.4 A2 Examples of internal audit services that involve assuming management

responsibilities include:

Setting internal audit policies or the strategic direction of internal

audit activities.

Directing and taking responsibility for the actions of the entity’s

internal audit employees.

Deciding which recommendations resulting from internal audit

activities to implement.

Reporting the results of the internal audit activities to those charged

with governance on behalf of management.

Performing procedures that form part of the internal control, such as

reviewing and approving changes to employee data access

privileges.

Taking responsibility for designing, implementing, monitoring and

maintaining internal control.

Performing outsourced internal audit services, comprising all or a

substantial portion of the internal audit function, where the firm or

network firm is responsible for determining the scope of the internal

audit work; and might have responsibility for one or more of the

matters noted above.

605.4 A3 When a firm uses the work of an internal audit function in an audit

engagement, ISAs require the performance of procedures to evaluate the

adequacy of that work. Similarly, when a firm or network firm accepts an



engagement to provide internal audit services to an audit client, the results

of those services might be used in conducting the external audit. This creates

a self-review threat because it is possible that the audit team will use the

results of the internal audit service for purposes of the audit engagement

without:

(a) Appropriately evaluating those results; or

(b) Exercising the same level of professional skepticism as would be

exercised when the internal audit work is performed by individuals

who are not members of the firm.

605.4 A4 Factors that are relevant in evaluating the level of such a self-review threat

include:

The materiality of the related financial statement amounts.

The risk of misstatement of the assertions related to those financial

statement amounts.

The degree of reliance that the audit team will place on the work of

the internal audit service, including in the course of an external audit.


review threat is using professionals who are not audit team members to

perform the service.


R605.5 A firm or a network firm shall not provide internal audit services to an audit

client that is a public interest entity, if the services relate to:

(a) A significant part of the internal controls over financial reporting;

(b) Financial accounting systems that generate information that is,

individually or in the aggregate, material to the client’s accounting

records or financial statements on which the firm will express an

opinion; or

(c) Amounts or disclosures that are, individually or in the aggregate,

material to the financial statements on which the firm will express

an opinion.



SUBSECTION 606

INFORMATION TECHNOLOGY SYSTEMS SERVICES

Introduction

606.1 Providing information technology (IT) systems services to an audit client

might create a self-review threat.




an IT systems service to an audit client. This subsection includes


IT systems services to audit clients in some circumstances because the



All Audit Clients

606.3 A1 Services related to IT systems include the design or implementation of

hardware or software systems. The IT systems might:

(a) Aggregate source data;

(b) Form part of the internal control over financial reporting; or

(c) Generate information that affects the accounting records or financial

statements, including related disclosures.

However, the IT systems might also involve matters that are unrelated to the

audit client’s accounting records or the internal control over financial

reporting or financial statements.


management responsibility. Providing the following IT systems services to

an audit client does not usually create a threat as long as personnel of the

firm or network firm do not assume a management responsibility:

(a) Designing or implementing IT systems that are unrelated to internal

control over financial reporting;

(b) Designing or implementing IT systems that do not generate

information forming a significant part of the accounting records or

financial statements;



(c) Implementing “off-the-shelf” accounting or financial information

reporting software that was not developed by the firm or network

firm, if the customization required to meet the client’s needs is not

significant; and

(d) Evaluating and making recommendations with respect to an IT

system designed, implemented or operated by another service

provider or the client.

R606.4 When providing IT systems services to an audit client, the firm or network

firm shall be satisfied that:

(a) The client acknowledges its responsibility for establishing and

monitoring a system of internal controls;

(b) The client assigns the responsibility to make all management

decisions with respect to the design and implementation of the

hardware or software system to a competent employee, preferably

within senior management;

(c) The client makes all management decisions with respect to the

design and implementation process;

(d) The client evaluates the adequacy and results of the design and

implementation of the system; and

(e) The client is responsible for operating the system (hardware or

software) and for the data it uses or generates.

606.4 A1 Factors that are relevant in evaluating the level of a self-review threat created

by providing IT systems services to an audit client include:

The nature of the service.

The nature of IT systems and the extent to which they impact or

interact with the client’s accounting records or financial statements.

The degree of reliance that will be placed on the particular IT

systems as part of the audit.


review threat is using professionals who are not audit team members to

perform the service.




R606.5 A firm or a network firm shall not provide IT systems services to an audit

client that is a public interest entity if the services involve designing or

implementing IT systems that:

(a) Form a significant part of the internal control over financial

reporting; or

(b) Generate information that is significant to the client’s accounting

records or financial statements on which the firm will express an

opinion.

SUBSECTION 607

LITIGATION SUPPORT SERVICES

Introduction

607.1 Providing certain litigation support services to an audit client might create a

self-review or advocacy threat.

607.2 In addition to the specific application material in this subsection, the

requirements and application material in paragraphs 600.1 to R600.10 are

relevant to applying the conceptual framework when providing a litigation

support service to an audit client.


All Audit Clients

607.3 A1 Litigation support services might include activities such as:

Assisting with document management and retrieval.

Acting as a witness, including an expert witness.

Calculating estimated damages or other amounts that might become

receivable or payable as the result of litigation or other legal dispute.


threats created by providing litigation support services to an audit client

include:




provided, for example, whether an expert witness is chosen and

appointed by a court.

The nature and characteristics of the service.

The extent to which the outcome of the litigation support service will

have a material effect on the financial statements on which the firm



review or advocacy threat is using a professional who was not an audit team

member to perform the service.

607.3 A4 If a firm or a network firm provides a litigation support service to an audit

client and the service involves estimating damages or other amounts that

affect the financial statements on which the firm will express an opinion, the

requirements and application material set out in Subsection 603 related to

valuation services apply.

SUBSECTION 608

LEGAL SERVICES

Introduction

608.1 Providing legal services to an audit client might create a self-review or

advocacy threat.




a legal service to an audit client. This subsection includes requirements that

prohibit firms and network firms from providing certain legal services to

audit clients in some circumstances because the threats cannot be addressed

by applying safeguards.


All Audit Clients

608.3 A1 Legal services are defined as any services for which the individual providing

the services must either:

(a) Have the required legal training to practice law; or



(b) Be admitted to practice law before the courts of the jurisdiction in

which such services are to be provided.

Acting in an Advisory Role

608.4 A1 Depending on the jurisdiction, legal advisory services might include a wide

and diversified range of service areas including both corporate and

commercial services to audit clients, such as:

Contract support.

Supporting an audit client in executing a transaction.

Mergers and acquisitions.

Supporting and assisting an audit client’s internal legal department.

Legal due diligence and restructuring.


threats created by providing legal advisory services to an audit client

include:

The materiality of the specific matter in relation to the client’s

financial statements.

The complexity of the legal matter and the degree of judgment

necessary to provide the service.



service might address a self-review or advocacy threat.


the service review the audit work or the service performed might


Acting as General Counsel

R608.5 A partner or employee of the firm or the network firm shall not serve as

General Counsel for legal affairs of an audit client.

608.5 A1 The position of General Counsel is usually a senior management position

with broad responsibility for the legal affairs of a company.



Acting in an Advocacy Role

R608.6 A firm or a network firm shall not act in an advocacy role for an audit client

in resolving a dispute or litigation when the amounts involved are material

to the financial statements on which the firm will express an opinion.

608.6 A1 Examples of actions that might be safeguards to address a self-review threat

created when acting in an advocacy role for an audit client when the amounts

involved are not material to the financial statements on which the firm will

express an opinion include:


service.


the service review the audit work or the service performed.

SUBSECTION 609

RECRUITING SERVICES

Introduction

609.1 Providing recruiting services to an audit client might create a self-interest,

familiarity or intimidation threat.




a recruiting service to an audit client. This subsection includes requirements

that prohibit firms and network firms from providing certain types of

recruiting services to audit clients in some circumstances because the threats

created cannot be addressed by applying safeguards.


All Audit Clients

609.3 A1 Recruiting services might include activities such as:

Developing a job description.

Developing a process for identifying and selecting potential

candidates.

Searching for or seeking out candidates.



Screening potential candidates for the role by:

o Reviewing the professional qualifications or competence of

applicants and determining their suitability for the position.

o Undertaking reference checks of prospective candidates.

o Interviewing and selecting suitable candidates and advising on

candidates’ competence.

Determining employment terms and negotiating details, such as

salary, hours and other compensation.


management responsibility. Providing the following services does not

usually create a threat as long as personnel of the firm or network firm does

not assume a management responsibility:

Reviewing the professional qualifications of a number of applicants

and providing advice on their suitability for the position.

Interviewing candidates and advising on a candidate’s competence

for financial accounting, administrative or control positions.

R609.4 When a firm or network firm provides recruiting services to an audit client,

the firm shall be satisfied that:

(a) The client assigns the responsibility to make all management

decisions with respect to hiring the candidate for the position to a

competent employee, preferably within senior management; and

(b) The client makes all management decisions with respect to the hiring

process, including:

Determining the suitability of prospective candidates and

selecting suitable candidates for the position.

Determining employment terms and negotiating details, such as

salary, hours and other compensation.

609.5 A1 Factors that are relevant in evaluating the level of self-interest, familiarity or

intimidation threats created by providing recruiting services to an audit

client include:

The nature of the requested assistance.

The role of the individual to be recruited.



Any conflicts of interest or relationships that might exist between

the candidates and the firm providing the advice or service.


interest, familiarity or intimidation threat is using professionals who are not

audit team members to perform the service.

Recruiting Services that are Prohibited

R609.6 When providing recruiting services to an audit client, the firm or the network

firm shall not act as a negotiator on the client’s behalf.

R609.7 A firm or a network firm shall not provide a recruiting service to an audit

client if the service relates to:

(a) Searching for or seeking out candidates; or

(b) Undertaking reference checks of prospective candidates, with

respect to the following positions:

(i) A director or officer of the entity; or

(ii) A member of senior management in a position to exert

significant influence over the preparation of the client’s

accounting records or the financial statements on which the firm


SUBSECTION 610

CORPORATE FINANCE SERVICES

Introduction

610.1 Providing corporate finance services to an audit client might create a self-

review or advocacy threat.




a corporate finance service to an audit client. This subsection includes


corporate finance services in some circumstances to audit clients because the





All Audit Clients

610.3 A1 Examples of corporate finance services that might create a self-review or

advocacy threat include:

Assisting an audit client in developing corporate strategies.

Identifying possible targets for the audit client to acquire.

Advising on disposal transactions.

Assisting in finance raising transactions.

Providing structuring advice.

Providing advice on the structuring of a corporate finance

transaction or on financing arrangements that will directly affect

amounts that will be reported in the financial statements on which

the firm will express an opinion.

610.3 A2 Factors that are relevant in evaluating the level of such threats created by

providing corporate finance services to an audit client include:

The degree of subjectivity involved in determining the appropriate

treatment for the outcome or consequences of the corporate finance

advice in the financial statements.

The extent to which:

○ The outcome of the corporate finance advice will directly affect

amounts recorded in the financial statements.

○ The amounts are material to the financial statements.

Whether the effectiveness of the corporate finance advice depends

on a particular accounting treatment or presentation in the financial

statements and there is doubt as to the appropriateness of the related

accounting treatment or presentation under the relevant financial

reporting framework.









Corporate Finance Services that are Prohibited

R610.4 A firm or a network firm shall not provide corporate finance services to an

audit client that involve promoting, dealing in, or underwriting the audit

client’s shares.

R610.5 A firm or a network firm shall not provide corporate finance advice to an

audit client where the effectiveness of such advice depends on a particular

accounting treatment or presentation in the financial statements on which the

firm will express an opinion and:

(a) The audit team has reasonable doubt as to the appropriateness of the

related accounting treatment or presentation under the relevant

financial reporting framework; and

(b) The outcome or consequences of the corporate finance advice will

have a material effect on the financial statements on which the firm




SECTION 800

REPORTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS THAT

INCLUDE A RESTRICTION ON USE AND DISTRIBUTION (AUDIT AND

REVIEW ENGAGEMENTS)

Introduction




800.2 This section sets out certain modifications to Part 4A which are permitted in

certain circumstances involving audits of special purpose financial

statements where the report includes a restriction on use and distribution. In

this section, an engagement to issue a restricted use and distribution report

in the circumstances set out in paragraph R800.3 is referred to as an “eligible

audit engagement.”


General

R800.3 When a firm intends to issue a report on an audit of special purpose financial

statements which includes a restriction on use and distribution, the

independence requirements set out in Part 4A shall be eligible for the

modifications that are permitted by this section, but only if:

(a) The firm communicates with the intended users of the report

regarding the modified independence requirements that are to be

applied in providing the service; and

(b) The intended users of the report understand the purpose and

limitations of the report and explicitly agree to the application of the

modifications.

800.3 A1 The intended users of the report might obtain an understanding of the

purpose and limitations of the report by participating, either directly, or

indirectly through a representative who has authority to act for the intended

users, in establishing the nature and scope of the engagement. In either case,

this participation helps the firm to communicate with intended users about

independence matters, including the circumstances that are relevant to

applying the conceptual framework. It also allows the firm to obtain the

agreement of the intended users to the modified independence requirements.

R800.4 Where the intended users are a class of users who are not specifically

identifiable by name at the time the engagement terms are established, the



firm shall subsequently make such users aware of the modified

independence requirements agreed to by their representative.

800.4 A1 For example, where the intended users are a class of users such as lenders in

a syndicated loan arrangement, the firm might describe the modified

independence requirements in an engagement letter to the representative of

the lenders. The representative might then make the firm’s engagement letter

available to the members of the group of lenders to meet the requirement for

the firm to make such users aware of the modified independence

requirements agreed to by the representative.

R800.5 When the firm performs an eligible audit engagement, any modifications to

Part 4A shall be limited to those set out in paragraphs R800.7 to R800.14.

The firm shall not apply these modifications when an audit of financial

statements is required by law or regulation.

R800.6 If the firm also issues an audit report that does not include a restriction on

use and distribution for the same client, the firm shall apply Part 4A to that

audit engagement.

Public Interest Entities

R800.7 When the firm performs an eligible audit engagement, the firm does not need

to apply the independence requirements set out in Part 4A that apply only to

public interest entity audit engagements.

Related Entities

R800.8 When the firm performs an eligible audit engagement, references to “audit

client” in Part 4A do not need to include its related entities. However, when

the audit team knows or has reason to believe that a relationship or

circumstance involving a related entity of the client is relevant to the

evaluation of the firm’s independence of the client, the audit team shall

include that related entity when identifying, evaluating and addressing

threats to independence.

Networks and Network Firms

R800.9 When the firm performs an eligible audit engagement, the specific

requirements regarding network firms set out in Part 4A do not need to be

applied. However, when the firm knows or has reason to believe that threats

to independence are created by any interests and relationships of a network

firm, the firm shall evaluate and address any such threat.



Financial Interests, Loans and Guarantees, Close Business Relationships, and Family

and Personal Relationships

R800.10 When the firm performs an eligible audit engagement:

(a) The relevant provisions set out in Sections 510, 511, 520, 521, 522,

524 and 525 need apply only to the members of the engagement

team, their immediate family members and, where applicable, close

family members;

(b) The firm shall identify, evaluate and address any threats to

independence created by interests and relationships, as set out in

Sections 510, 511, 520, 521, 522, 524 and 525, between the audit

client and the following audit team members:

(i) Those who provide consultation regarding technical or industry

specific issues, transactions or events; and

(ii) Those who provide quality control for the engagement,

including those who perform the engagement quality control

review; and

(c) The firm shall evaluate and address any threats that the engagement

team has reason to believe are created by interests and relationships

between the audit client and others within the firm who can directly

influence the outcome of the audit engagement.

800.10 A1 Others within a firm who can directly influence the outcome of the audit

engagement include those who recommend the compensation, or who

provide direct supervisory, management or other oversight, of the audit

engagement partner in connection with the performance of the audit

engagement including those at all successively senior levels above the

engagement partner through to the individual who is the firm’s Senior or

Managing Partner (Chief Executive or equivalent).

R800.11 When the firm performs an eligible audit engagement, the firm shall evaluate

and address any threats that the engagement team has reason to believe are

created by financial interests in the audit client held by individuals, as set

out in paragraphs R510.4(c) and (d), R510.5, R510.7 and 510.10 A5 and A9.

R800.12 When the firm performs an eligible audit engagement, the firm, in applying

the provisions set out in paragraphs R510.4(a), R510.6 and R510.7 to

interests of the firm, shall not hold a material direct or a material indirect

financial interest in the audit client.



Employment with an Audit Client

R800.13 When the firm performs an eligible audit engagement, the firm shall evaluate

and address any threats created by any employment relationships as set out

in paragraphs 524.3 A1 to 524.5 A3.

Providing Non-Assurance Services

R800.14 If the firm performs an eligible audit engagement and provides a non-

assurance service to the audit client, the firm shall comply with Sections 410

to 430 and Section 600, including its subsections, subject to paragraphs

R800.7 to R800.9.


Page 210 of 263 INDEX OF PART 4B


OTHER THAN AUDIT AND REVIEW ENGAGEMENTS

Section 900 Applying the Conceptual Framework to Independence for Assurance

Engagements Other than Audit and Review Engagements ....................... 211

Section 905 Fees ........................................................................................................... 220

Section 906 Gifts and Hospitality ................................................................................. 222

Section 907 Actual or Threatened Litigation ................................................................ 223

Section 910 Financial Interests ..................................................................................... 224

Section 911 Loans and Guarantees ............................................................................... 228

Section 920 Business Relationships .............................................................................. 230

Section 921 Family and Personal Relationships ........................................................... 232

Section 922 Recent Service with an Assurance Client .................................................. 236

Section 923 Serving as a Director or Officer of an Assurance Client ........................... 238

Section 924 Employment with an Assurance Client ..................................................... 239

Section 940 Long Association of Personnel with an Assurance Client ........................ 242

Section 950 Provision of Non-Assurance Services to Assurance Clients Other than Audit

and Review Engagement Clients ............................................................... 245

Section 990 Reports that Include a Restriction on Use and Distribution (Assurance

Engagements Other than Audit and Review Engagements) ...................... 249




OTHER THAN AUDIT AND REVIEW ENGAGEMENTS

SECTION 900

APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR

ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW

ENGAGEMENTS

Introduction

General

900.1 This Part applies to assurance engagements other than audit and review

engagements (referred to as “assurance engagements” in this Part).

Examples of such engagements include:

An audit of specific elements, accounts or items of a financial

statement.

Performance assurance on a company’s key performance indicators.



900.3 ISQC 1 requires a firm to establish policies and procedures designed to

provide it with reasonable assurance that the firm, its personnel and, where

applicable, others subject to independence requirements maintain

independence where required by relevant ethics standards. ISAEs establish

responsibilities for engagement partners and engagement teams at the level

of the engagement. The allocation of responsibilities within a firm will

depend on its size, structure and organization. Many of the provisions of Part

4B do not prescribe the specific responsibility of individuals within the firm

for actions related to independence, instead referring to “firm” for ease of

reference. Firms assign responsibility for a particular action to an individual

or a group of individuals (such as an assurance team) in accordance with

ISQC 1. In addition, an individual chartered accountant remains responsible

for compliance with any provisions that apply to that accountant’s activities,

interests or relationships.

900.4 Independence is linked to the principles of objectivity and integrity. It

comprises:


of a conclusion without being affected by influences that

compromise professional judgment, thereby allowing an individual



to act with integrity, and exercise objectivity and professional

skepticism.



third party would be likely to conclude that a firm’s or an assurance

team member’s integrity, objectivity or professional skepticism has

been compromised.

In this Part, references to an individual or firm being “independent” mean

that the individual or firm has complied with the provisions of this Part.

900.5 When performing assurance engagements, the Code requires firms to

comply with the fundamental principles and be independent. This Part sets

out specific requirements and application material on how to apply the

conceptual framework to maintain independence when performing such

engagements. The conceptual framework set out in Section 120 applies to

independence as it does to the fundamental principles set out in Section 110.

900.6 This Part describes:

(a) Facts and circumstances, including professional activities, interests

and relationships, that create or might create threats to

independence;

(b) Potential actions, including safeguards, that might be appropriate to

address any such threats; and

(c) Some situations where the threats cannot be eliminated or there can

be no safeguards to reduce the threats to an acceptable level.

Description of Other Assurance Engagements

900.7 Assurance engagements are designed to enhance intended users’ degree of

confidence about the outcome of the evaluation or measurement of a subject

matter against criteria. In an assurance engagement, the firm expresses a

conclusion designed to enhance the degree of confidence of the intended

users (other than the responsible party) about the outcome of the evaluation

or measurement of a subject matter against criteria. The Assurance

Framework describes the elements and objectives of an assurance

engagement and identifies engagements to which ISAEs apply. For a

description of the elements and objectives of an assurance engagement, refer

to the Assurance Framework.

900.8 The outcome of the evaluation or measurement of a subject matter is the

information that results from applying the criteria to the subject matter. The

term “subject matter information” is used to mean the outcome of the

evaluation or measurement of a subject matter. For example, the Assurance



Framework states that an assertion about the effectiveness of internal control

(subject matter information) results from applying a framework for

evaluating the effectiveness of internal control, such as COSO or CoCo

(criteria), to internal control, a process (subject matter).

900.9 Assurance engagements might be assertion-based or direct reporting. In

either case, they involve three separate parties: a firm, a responsible party

and intended users.

900.10 In an assertion-based assurance engagement, the evaluation or measurement

of the subject matter is performed by the responsible party. The subject

matter information is in the form of an assertion by the responsible party that

is made available to the intended users.

900.11 In a direct reporting assurance engagement, the firm:

(a) Directly performs the evaluation or measurement of the subject

matter; or

(b) Obtains a representation from the responsible party that has

performed the evaluation or measurement that is not available to the

intended users. The subject matter information is provided to the

intended users in the assurance report.

Reports that Include a Restriction on Use and Distribution

900.12 An assurance report might include a restriction on use and distribution. If it

does and the conditions set out in Section 990 are met, then the independence

requirements in this Part may be modified as provided in Section 990.

Audit and Review Engagements

900.13 Independence standards for audit and review engagements are set out in Part

4A – Independence for Audit and Review Engagements. If a firm performs

both an assurance engagement and an audit or review engagement for the

same client, the requirements in Part 4A continue to apply to the firm, a

network firm and the audit or review team members.


General

R900.14 A firm performing an assurance engagement shall be independent.

R900.15 A firm shall apply the conceptual framework set out in Section 120 to

identify, evaluate and address threats to independence in relation to an

assurance engagement.



Network firms

R900.16 When a firm has reason to believe that interests and relationships of a

network firm create a threat to the firm’s independence, the firm shall

evaluate and address any such threat.

900.16 A1 Network firms are discussed in paragraphs 400.50 A1 to 400.54 A1.

Related Entities

R900.17 When the assurance team knows or has reason to believe that a relationship

or circumstance involving a related entity of the assurance client is relevant

to the evaluation of the firm’s independence from the client, the assurance

team shall include that related entity when identifying, evaluating and

addressing threats to independence.

Types of Assurance Engagements

Assertion-based Assurance Engagements

R900.18 When performing an assertion-based assurance engagement:

(a) The assurance team members and the firm shall be independent of

the assurance client (the party responsible for the subject matter

information, and which might be responsible for the subject matter)

as set out in this Part. The independence requirements set out in this

Part prohibit certain relationships between assurance team members

and (i) directors or officers, and (ii) individuals at the client in a

position to exert significant influence over the subject matter

information;

(b) The firm shall apply the conceptual framework set out in Section

120 to relationships with individuals at the client in a position to

exert significant influence over the subject matter of the

engagement; and

(c) The firm shall evaluate and address any threats that the firm has

reason to believe are created by network firm interests and

relationships.

R900.19 When performing an assertion-based assurance engagement where the

responsible party is responsible for the subject matter information but not

the subject matter:


the party responsible for the subject matter information (the

assurance client); and



(b) The firm shall evaluate and address any threats the firm has reason

to believe are created by interests and relationships between an

assurance team member, the firm, a network firm and the party

responsible for the subject matter.

900.19 A1 In the majority of assertion-based assurance engagements, the responsible

party is responsible for both the subject matter information and the subject

matter. However, in some engagements, the responsible party might not be

responsible for the subject matter. An example might be when a firm is

engaged to perform an assurance engagement regarding a report that an

environmental consultant has prepared about a company’s sustainability

practices for distribution to intended users. In this case, the environmental

consultant is the responsible party for the subject matter information but the

company is responsible for the subject matter (the sustainability practices).

Direct Reporting Assurance Engagements

R900.20 When performing a direct reporting assurance engagement:


the assurance client (the party responsible for the subject matter);

and

(b) The firm shall evaluate and address any threats to independence the

firm has reason to believe are created by network firm interests and

relationships.

Multiple Responsible Parties

900.21 A1 In some assurance engagements, whether assertion-based or direct reporting,

there might be several responsible parties. In determining whether it is

necessary to apply the provisions in this Part to each responsible party in

such engagements, the firm may take into account certain matters. These

matters include whether an interest or relationship between the firm, or an

assurance team member, and a particular responsible party would create a

threat to independence that is not trivial and inconsequential in the context

of the subject matter information. This determination will take into account

factors such as:

(a) The materiality of the subject matter information (or of the subject

matter) for which the particular responsible party is responsible.

(b) The degree of public interest associated with the engagement.

If the firm determines that the threat created by any such interest or

relationship with a particular responsible party would be trivial and

inconsequential, it might not be necessary to apply all of the provisions of

this section to that responsible party.




Period During which Independence is Required

R900.30 Independence, as required by this Part, shall be maintained during both:

(a) The engagement period; and

(b) The period covered by the subject matter information.

900.30 A1 The engagement period starts when the assurance team begins to perform

assurance services with respect to the particular engagement. The

engagement period ends when the assurance report is issued. When the

engagement is of a recurring nature, it ends at the later of the notification by

either party that the professional relationship has ended or the issuance of

the final assurance report.

R900.31 If an entity becomes an assurance client during or after the period covered

by the subject matter information on which the firm will express a

conclusion, the firm shall determine whether any threats to independence are

created by:

(a) Financial or business relationships with the assurance client during

or after the period covered by the subject matter information but

before accepting the assurance engagement; or

(b) Previous services provided to the assurance client.

R900.32 Threats to independence are created if a non-assurance service was provided

to the assurance client during, or after the period covered by the subject

matter information, but before the assurance team begins to perform

assurance services, and the service would not be permitted during the

engagement period. In such circumstances, the firm shall evaluate and

address any threat to independence created by the service. If the threats are

not at an acceptable level, the firm shall only accept the assurance

engagement if the threats are reduced to an acceptable level.


Using professionals who are not assurance team members to perform

the service.

Having an appropriate reviewer review the assurance and non-

assurance work as appropriate.

R900.33 If a non-assurance service that would not be permitted during the

engagement period has not been completed and it is not practical to complete

or end the service before the commencement of professional services in

connection with the assurance engagement, the firm shall only accept the

assurance engagement if:



(a) The firm is satisfied that:

(i) The non-assurance service will be completed within a short

period of time; or

(ii) The client has arrangements in place to transition the service to

another provider within a short period of time;

(b) The firm applies safeguards when necessary during the service

period; and

(c) The firm discusses the matter with those charged with governance.


General Documentation of Independence for Assurance Engagements Other than

Audit and Review Engagements

R900.40 A firm shall document conclusions regarding compliance with this Part, and

the substance of any relevant discussions that support those conclusions. In

particular:

(a) When safeguards are applied to address a threat, the firm shall

document the nature of the threat and the safeguards in place or

applied; and

(b) When a threat required significant analysis and the firm concluded

that the threat was already at an acceptable level, the firm shall

document the nature of the threat and the rationale for the

conclusion.

900.40 A1 Documentation provides evidence of the firm’s judgments in forming

conclusions regarding compliance with this Part. However, a lack of

documentation does not determine whether a firm considered a particular

matter or whether the firm is independent.




Breach of an Independence Provision for Assurance Engagements Other than Audit

and Review Engagements

When a Firm Identifies a Breach

R900.50 If a firm concludes that a breach of a requirement in this Part has occurred,

the firm shall:

(a) End, suspend or eliminate the interest or relationship that created the

breach;

(b) Evaluate the significance of the breach and its impact on the firm’s

objectivity and ability to issue an assurance report; and

(c) Determine whether action can be taken that satisfactorily addresses

the consequences of the breach.

In making this determination, the firm shall exercise professional judgment

and take into account whether a reasonable and informed third party would

be likely to conclude that the firm’s objectivity would be compromised, and

therefore, the firm would be unable to issue an assurance report.

R900.51 If the firm determines that action cannot be taken to address the

consequences of the breach satisfactorily, the firm shall, as soon as possible,

inform the party that engaged the firm or those charged with governance, as

appropriate. The firm shall also take the steps necessary to end the assurance

engagement in compliance with any applicable legal or regulatory

requirements relevant to ending the assurance engagement.

R900.52 If the firm determines that action can be taken to address the consequences

of the breach satisfactorily, the firm shall discuss the breach and the action

it has taken or proposes to take with the party that engaged the firm or those

charged with governance, as appropriate. The firm shall discuss the breach

and the proposed action on a timely basis, taking into account the

circumstances of the engagement and the breach.

R900.53 If the party that engaged the firm does not, or those charged with governance

do not concur that the action proposed by the firm in accordance with

paragraph R900.50(c) satisfactorily addresses the consequences of the

breach, the firm shall take the steps necessary to end the assurance

engagement in compliance with any applicable legal or regulatory

requirements relevant to ending the assurance engagement.



Documentation

R900.54 In complying with the requirements in paragraphs R900.50 to R900.53, the

firm shall document:

(a) The breach;

(b) The actions taken;

(c) The key decisions made; and

(d) All the matters discussed with the party that engaged the firm or

those charged with governance.

R900.55 If the firm continues with the assurance engagement, it shall document:

(a) The conclusion that, in the firm’s professional judgment, objectivity

has not been compromised; and

(b) The rationale for why the action taken satisfactorily addressed the

consequences of the breach so that the firm could issue an assurance

report.



SECTION 905

FEES

Introduction




905.2 The nature and level of fees or other types of remuneration might create a

self-interest or intimidation threat. This section sets out specific




Fees―Relative Size

905.3 A1 When the total fees generated from an assurance client by the firm

expressing the conclusion in an assurance engagement represent a large

proportion of the total fees of that firm, the dependence on that client and

concern about losing the client create a self-interest or intimidation threat.


The operating structure of the firm.

Whether the firm is well established or new.


the firm.


interest or intimidation threat is increasing the client base in the firm to

reduce dependence on the assurance client.

905.3 A4 A self-interest or intimidation threat is also created when the fees generated

by the firm from an assurance client represent a large proportion of the

revenue from an individual partner’s clients.


or intimidation threat include:

Increasing the client base of the partner to reduce dependence on the

assurance client.



Having an appropriate reviewer who was not an assurance team

member review the work.

Fees―Overdue

905.4 A1 A self-interest threat might be created if a significant part of fees is not paid

before the assurance report, if any, for the following period is issued. It is

generally expected that the firm will require payment of such fees before any

such report is issued. The requirements and application material set out in

Section 911 with respect to loans and guarantees might also apply to

situations where such unpaid fees exist.


threat include:

Obtaining partial payment of overdue fees.

Having an appropriate reviewer who did not take part in the

assurance engagement review the work performed.

R905.5 When a significant part of fees due from an assurance client remains unpaid

for a long time, the firm shall determine:

(a) Whether the overdue fees might be equivalent to a loan to the client;

and

(b) Whether it is appropriate for the firm to be re-appointed or continue

the assurance engagement.

Contingent Fees

905.6 A1 Contingent fees are fees calculated on a predetermined basis relating to the

outcome of a transaction or the result of the services performed. A

contingent fee charged through an intermediary is an example of an indirect

contingent fee. In this section, a fee is not regarded as being contingent if

established by a court or other public authority.

R905.7 A firm shall not charge directly or indirectly a contingent fee for an


R905.8 A firm shall not charge directly or indirectly a contingent fee for a non-

assurance service provided to an assurance client if the outcome of the non-

assurance service, and therefore, the amount of the fee, is dependent on a

future or contemporary judgment related to a matter that is material to the

subject matter information of the assurance engagement.



SECTION 906

GIFTS AND HOSPITALITY

Introduction




906.2 Accepting gifts and hospitality from an assurance client might create a self-

interest, familiarity or intimidation threat. This section sets out a specific

requirement and application material relevant to applying the conceptual


Requirement and Application Material

R906.3 A firm or an assurance team member shall not accept gifts and hospitality

from an assurance client, unless the value is trivial and inconsequential.

906.3 A1 Where a firm or assurance team member is offering or accepting an

inducement to or from an assurance client, the requirements and application

material set out in Section 340 apply and non-compliance with these

requirements might create threats to independence.

906.3 A2 The requirements set out in Section 340 relating to offering or accepting

inducements do not allow a firm or assurance team member to accept gifts

and hospitality where the intent is to improperly influence behavior even if

the value is trivial and inconsequential.



SECTION 907

ACTUAL OR THREATENED LITIGATION

Introduction




907.2 When litigation with an assurance client occurs, or appears likely, self-

interest and intimidation threats are created. This section sets out specific


circumstances.


General

907.3 A1 The relationship between client management and assurance team members

must be characterized by complete candor and full disclosure regarding all

aspects of a client’s operations. Adversarial positions might result from

actual or threatened litigation between an assurance client and the firm or an

assurance team member. Such adversarial positions might affect

management’s willingness to make complete disclosures and create self-

interest and intimidation threats.


The materiality of the litigation.

Whether the litigation relates to a prior assurance engagement.

907.3 A3 If the litigation involves an assurance team member, an example of an action

that might eliminate such self-interest and intimidation threats is removing

that individual from the assurance team.

907.3 A4 An example of an action that might be a safeguard to address such self-

interest and intimidation threats is having an appropriate reviewer review the

work performed.



SECTION 910

FINANCIAL INTERESTS

Introduction




910.2 Holding a financial interest in an assurance client might create a self-interest




General

910.3 A1 A financial interest might be held directly or indirectly through an

intermediary such as a collective investment vehicle, an estate or a trust.

When a beneficial owner has control over the intermediary or ability to

influence its investment decisions, the Code defines that financial interest to

be direct. Conversely, when a beneficial owner has no control over the

intermediary or ability to influence its investment decisions, the Code

defines that financial interest to be indirect.

910.3 A2 This section contains references to the “materiality” of a financial interest.

In determining whether such an interest is material to an individual, the

combined net worth of the individual and the individual’s immediate family

members may be taken into account.

910.3 A3 Factors that are relevant in evaluating the level of a self-interest threat

created by holding a financial interest in an assurance client include:

The role of the individual holding the financial interest.





Financial Interests Held by the Firm, Assurance Team Members and Immediate

Family

R910.4 A direct financial interest or a material indirect financial interest in the

assurance client shall not be held by:

(a) The firm; or

(b) An assurance team member or any of that individual’s immediate

family.

Financial Interests in an Entity Controlling an Assurance Client

R910.5 When an entity has a controlling interest in the assurance client and the client

is material to the entity, neither the firm, nor an assurance team member, nor

any of that individual’s immediate family shall hold a direct or material

indirect financial interest in that entity.

Financial Interests Held as Trustee

R910.6 Paragraph R910.4 shall also apply to a financial interest in an assurance

client held in a trust for which the firm or individual acts as trustee unless:

(a) None of the following is a beneficiary of the trust: the trustee, the

assurance team member or any of that individual’s immediate

family, or the firm;

(b) The interest in the assurance client held by the trust is not material

to the trust;

(c) The trust is not able to exercise significant influence over the

assurance client; and

(d) None of the following can significantly influence any investment

decision involving a financial interest in the assurance client: the

trustee, the assurance team member or any of that individual’s

immediate family, or the firm.

Financial Interests Received Unintentionally

R910.7 If a firm, an assurance team member, or any of that individual’s immediate

family, receives a direct financial interest or a material indirect financial

interest in an assurance client by way of an inheritance, gift, as a result of a

merger, or in similar circumstances and the interest would not otherwise be

permitted to be held under this section, then:



(a) If the interest is received by the firm, the financial interest shall be

disposed of immediately, or enough of an indirect financial interest

shall be disposed of so that the remaining interest is no longer

material; or

(b) If the interest is received by an assurance team member, or by any

of that individual’s immediate family, the individual who received

the financial interest shall immediately dispose of the financial

interest, or dispose of enough of an indirect financial interest so that

the remaining interest is no longer material.

Financial Interests – Other Circumstances

Close Family

910.8 A1 A self-interest threat might be created if an assurance team member knows

that a close family member has a direct financial interest or a material

indirect financial interest in the assurance client.


The nature of the relationship between the assurance team member

and the close family member.


The materiality of the financial interest to the close family member.


Having the close family member dispose, as soon as practicable, of

all of the financial interest or dispose of enough of an indirect

financial interest so that the remaining interest is no longer material.

Removing the individual from the assurance team.


interest threat is having an appropriate reviewer review the work of the

assurance team member.



Other Individuals

910.8 A5 A self-interest threat might be created if an assurance team member knows

that a financial interest is held in the assurance client by individuals such as:

Partners and professional employees of the firm, apart from those

who are specifically not permitted to hold such financial interests by

paragraph R910.4, or their immediate family members.

Individuals with a close personal relationship with an assurance

team member.


removing the assurance team member with the personal relationship from

the assurance team.


threat include:

Excluding the assurance team member from any significant

decision-making concerning the assurance engagement.

Having an appropriate reviewer review the work of the assurance

team member.



SECTION 911

LOANS AND GUARANTEES

Introduction




911.2 A loan or a guarantee of a loan with an assurance client might create a self-

interest threat. This section sets out specific requirements and application


circumstances.


General

911.3 A1 This section contains references to the “materiality” of a loan or guarantee.

In determining whether such a loan or guarantee is material to an individual,

the combined net worth of the individual and the individual’s immediate

family members may be taken into account.

Loans and Guarantees with an Assurance Client

R911.4 A firm, an assurance team member, or any of that individual’s immediate

family shall not make or guarantee a loan to an assurance client unless the

loan or guarantee is immaterial to both:

(a) The firm or the individual making the loan or guarantee, as

applicable; and

(b) The client.

Loans and Guarantees with an Assurance Client that is a Bank or Similar Institution


family shall not accept a loan, or a guarantee of a loan, from an assurance

client that is a bank or a similar institution unless the loan or guarantee is

made under normal lending procedures, terms and conditions.

911.5 A1 Examples of loans include mortgages, bank overdrafts, car loans and credit

card balances.



911.5 A2 Even if a firm receives a loan from an assurance client that is a bank or

similar institution under normal lending procedures, terms and conditions,

the loan might create a self-interest threat if it is material to the assurance

client or firm receiving the loan.


interest threat is having the work reviewed by an appropriate reviewer, who

is not an assurance team member, from a network firm that is not a

beneficiary of the loan.

Deposit or Brokerage Accounts


family shall not have deposits or a brokerage account with an assurance

client that is a bank, broker, or similar institution, unless the deposit or

account is held under normal commercial terms.

Loans and Guarantees with an Assurance Client that is not a Bank or Similar

Institution

R911.7 A firm or an assurance team member, or any of that individual’s immediate

family, shall not accept a loan from, or have a borrowing guaranteed by, an

assurance client that is not a bank or similar institution, unless the loan or

guarantee is immaterial to both:

(a) The firm, or the individual receiving the loan or guarantee, as

applicable; and

(b) The client.



SECTION 920

BUSINESS RELATIONSHIPS

Introduction




920.2 A close business relationship with an assurance client or its management

might create a self-interest or intimidation threat. This section sets out

specific requirements and application material relevant to applying the



General

920.3 A1 This section contains references to the “materiality” of a financial interest

and the “significance” of a business relationship. In determining whether

such a financial interest is material to an individual, the combined net worth

of the individual and the individual’s immediate family members may be

taken into account.

920.3 A2 Examples of a close business relationship arising from a commercial

relationship or common financial interest include:

Having a financial interest in a joint venture with either the client or

a controlling owner, director or officer or other individual who

performs senior managerial activities for that client.

Arrangements to combine one or more services or products of the

firm with one or more services or products of the client and to market

the package with reference to both parties.

Distribution or marketing arrangements under which the firm

distributes or markets the client’s products or services, or the client

distributes or markets the firm’s products or services.

Firm, Assurance Team Member or Immediate Family Business Relationships

R920.4 A firm or an assurance team member shall not have a close business

relationship with an assurance client or its management unless any financial

interest is immaterial and the business relationship is insignificant to the

client or its management and the firm or the assurance team member, as

applicable.



920.4 A1 A self-interest or intimidation threat might be created if there is a close

business relationship between the assurance client or its management and

the immediate family of an assurance team member.

Buying Goods or Services

920.5 A1 The purchase of goods and services from an assurance client by a firm, or

an assurance team member, or any of that individual’s immediate family

does not usually create a threat to independence if the transaction is in the

normal course of business and at arm’s length. However, such transactions

might be of such a nature and magnitude that they create a self-interest

threat.


Eliminating or reducing the magnitude of the transaction.

Removing the individual from the assurance team.



SECTION 921

FAMILY AND PERSONAL RELATIONSHIPS

Introduction




921.2 Family or personal relationships with client personnel might create a self-





General

921.3 A1 A self-interest, familiarity or intimidation threat might be created by family

and personal relationships between an assurance team member and a director

or officer or, depending on their role, certain employees of the assurance

client.


The individual’s responsibilities on the assurance team.

The role of the family member or other individual within the client,

and the closeness of the relationship.

Immediate Family of an Assurance Team Member

921.4 A1 A self-interest, familiarity or intimidation threat is created when an

immediate family member of an assurance team member is an employee in

a position to exert significant influence over the subject matter of the

engagement.


The position held by the immediate family member.

The role of the assurance team member.


or intimidation threat is removing the individual from the assurance team.





of the assurance team so that the assurance team member does not deal with

matters that are within the responsibility of the immediate family member.

R921.5 An individual shall not participate as an assurance team member when any

of that individual’s immediate family:

(a) Is a director or officer of the assurance client;

(b) Is an employee in a position to exert significant influence over the

subject matter information of the assurance engagement; or

(c) Was in such a position during any period covered by the engagement

or the subject matter information.

Close Family of an Assurance Team Member

921.6 A1 A self-interest, familiarity or intimidation threat is created when a close

family member of an assurance team member is:

(a) A director or officer of the assurance client; or




The nature of the relationship between the assurance team member

and the close family member.

The position held by the close family member.







matters that are within the responsibility of the close family member.



Other Close Relationships of an Assurance Team Member

R921.7 An assurance team member shall consult in accordance with firm policies

and procedures if the assurance team member has a close relationship with

an individual who is not an immediate or close family member, but who is:

(a) A director or officer of the assurance client; or




or intimidation threat created by such relationships include:

The nature of the relationship between the individual and the









matters that are within the responsibility of the individual with whom the

assurance team member has a close relationship.

Relationships of Partners and Employees of the Firm

921.8 A1 A self-interest, familiarity or intimidation threat might be created by a

personal or family relationship between:

(a) A partner or employee of the firm who is not an assurance team

member; and

(b) A director or officer of the assurance client or an employee in a

position to exert significant influence over the subject matter

information of the assurance engagement.




The nature of the relationship between the partner or employee of

the firm and the director or officer or employee of the client.

The degree of interaction of the partner or employee of the firm with

the assurance team.

The position of the partner or employee within the firm.

The role of the individual within the client.

921.8 A3 Examples of actions that might be safeguards to address such self-interest,

familiarity or intimidation threats include:

Structuring the partner’s or employee’s responsibilities to reduce

any potential influence over the assurance engagement.

Having an appropriate reviewer review the relevant assurance work

performed.



SECTION 922

RECENT SERVICE WITH AN ASSURANCE CLIENT

Introduction




922.2 If an assurance team member has recently served as a director or officer or

employee of the assurance client, a self-interest, self-review or familiarity

threat might be created. This section sets out specific requirements and


circumstances.


Service During the Period Covered by the Assurance Report

R922.3 The assurance team shall not include an individual who, during the period

covered by the assurance report:

(a) Had served as a director or officer of the assurance client; or



Service Prior to the Period Covered by the Assurance Report

922.4 A1 A self-interest, self-review or familiarity threat might be created if, before

the period covered by the assurance report, an assurance team member:

(a) Had served as a director or officer of the assurance client; or



For example, a threat would be created if a decision made or work performed

by the individual in the prior period, while employed by the client, is to be

evaluated in the current period as part of the current assurance engagement.




The position the individual held with the client.

The length of time since the individual left the client.



interest, self-review or familiarity threat is having an appropriate reviewer

review the work performed by the assurance team member.



SECTION 923

SERVING AS A DIRECTOR OR OFFICER OF AN ASSURANCE CLIENT

Introduction




923.2 Serving as a director or officer of an assurance client creates self-review and

self-interest threats. This section sets out specific requirements and


circumstances.


Service as Director or Officer

R923.3 A partner or employee of the firm shall not serve as a director or officer of

an assurance client of the firm.

Service as Company Secretary

R923.4 A partner or employee of the firm shall not serve as Company Secretary for

an assurance client of the firm unless:

(a) This practice is specifically permitted under local law, professional

rules or practice;

(b) Management makes all decisions; and

(c) The duties and activities performed are limited to those of a routine

and administrative nature, such as preparing minutes and

maintaining statutory returns.

923.4 A1 The position of Company Secretary has different implications in different

jurisdictions. Duties might range from: administrative duties (such as

personnel management and the maintenance of company records and

registers) to duties as diverse as ensuring that the company complies with

regulations or providing advice on corporate governance matters. Usually

this position is seen to imply a close association with the entity. Therefore,

a threat is created if a partner or employee of the firm serves as Company

Secretary for an assurance client. (More information on providing non-

assurance services to an assurance client is set out in Section 950, Provision

of Non-assurance Services to an Assurance Client).



SECTION 924

EMPLOYMENT WITH AN ASSURANCE CLIENT

Introduction




924.2 Employment relationships with an assurance client might create a self-





General

924.3 A1 A familiarity or intimidation threat might be created if any of the following

individuals have been an assurance team member or partner of the firm:

A director or officer of the assurance client.

An employee who is in a position to exert significant influence over

the subject matter information of the assurance engagement.

Former Partner or Assurance Team Member Restrictions

R924.4 If a former partner has joined an assurance client of the firm or a former

assurance team member has joined the assurance client as:



subject matter information of the assurance engagement,

the individual shall not continue to participate in the firm’s business or

professional activities.

924.4 A1 Even if one of the individuals described in paragraph R924.4 has joined the

assurance client in such a position and does not continue to participate in the

firm’s business or professional activities, a familiarity or intimidation threat

might still be created.



924.4 A2 A familiarity or intimidation threat might also be created if a former partner

of the firm has joined an entity in one of the positions described in paragraph

924.3 A1 and the entity subsequently becomes an assurance client of the

firm.


The position the individual has taken at the client.

Any involvement the individual will have with the assurance team.

The length of time since the individual was an assurance team

member or partner of the firm.

The former position of the individual within the assurance team or

firm. An example is whether the individual was responsible for

maintaining regular contact with the client’s management or those

charged with governance.

924.4 A4 Examples of actions that might be safeguards to address such a familiarity

or intimidation threat include:

Making arrangements such that the individual is not entitled to any

benefits or payments from the firm, unless made in accordance with

fixed pre-determined arrangements.

Making arrangements such that any amount owed to the individual

is not material to the firm.

Modifying the plan for the assurance engagement.

Assigning to the assurance team individuals who have sufficient

experience relative to the individual who has joined the client.

Having an appropriate reviewer review the work of the former


Assurance Team Members Entering Employment Negotiations with a Client

R924.5 A firm shall have policies and procedures that require assurance team

members to notify the firm when entering employment negotiations with an

assurance client.



924.5 A1 A self-interest threat is created when an assurance team member participates

in the assurance engagement while knowing that the assurance team member

will, or might, join the client sometime in the future.


removing the individual from the assurance engagement.


interest threat is having an appropriate reviewer review any significant

judgments made by that assurance team member while on the team.



SECTION 940

LONG ASSOCIATION OF PERSONNEL WITH AN ASSURANCE CLIENT

Introduction




940.2 When an individual is involved in an assurance engagement of a recurring

nature over a long period of time, familiarity and self-interest threats might

be created. This section sets out requirements and application material



General

940.3 A1 A familiarity threat might be created as a result of an individual’s long

association with:

(a) The assurance client;

(b) The assurance client’s senior management; or

(c) The subject matter and subject matter information of the assurance

engagement.

940.3 A2 A self-interest threat might be created as a result of an individual’s concern

about losing a longstanding assurance client or an interest in maintaining a

close personal relationship with a member of senior management or those

charged with governance. Such a threat might influence the individual’s

judgment inappropriately.

940.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-

interest threats include:

The nature of the assurance engagement.

How long the individual has been an assurance team member, the

individual’s seniority on the team, and the nature of the roles

performed, including if such a relationship existed while the

individual was at a prior firm.



The extent to which the work of the individual is directed, reviewed

and supervised by more senior personnel.

The extent to which the individual, due to the individual’s seniority,

has the ability to influence the outcome of the assurance

engagement, for example, by making key decisions or directing the

work of other engagement team members.

The closeness of the individual’s personal relationship with the

assurance client or, if relevant, senior management.

The nature, frequency and extent of interaction between the

individual and the assurance client.

Whether the nature or complexity of the subject matter or subject

matter information has changed.

Whether there have been any recent changes in the individual or

individuals who are the responsible party or, if relevant, senior

management.

940.3 A4 The combination of two or more factors might increase or reduce the level

of the threats. For example, familiarity threats created over time by the

increasingly close relationship between an individual and the assurance

client would be reduced by the departure of the individual who is the

responsible party.

940.3 A5 An example of an action that might eliminate the familiarity and self- interest

threats in relation to a specific engagement would be rotating the individual

off the assurance team.


self-interest threats include:

Changing the role of the individual on the assurance team or the

nature and extent of the tasks the individual performs.

Having an appropriate reviewer who was not an assurance team

member review the work of the individual.

Performing regular independent internal or external quality reviews

of the engagement.



R940.4 If a firm decides that the level of the threats created can only be addressed

by rotating the individual off the assurance team, the firm shall determine an

appropriate period during which the individual shall not:

(a) Be a member of the engagement team for the assurance engagement;

(b) Provide quality control for the assurance engagement; or

(c) Exert direct influence on the outcome of the assurance engagement.

The period shall be of sufficient duration to allow the familiarity and self-

interest threats to be addressed.



SECTION 950

PROVISION OF NON-ASSURANCE SERVICES TO ASSURANCE CLIENTS

OTHER THAN AUDIT AND REVIEW ENGAGEMENT CLIENTS

Introduction


independent, and apply the conceptual framework set out in Section 120 to


950.2 Firms might provide a range of non-assurance services to their assurance

clients, consistent with their skills and expertise. Providing certain non-

assurance services to assurance clients might create threats to compliance

with the fundamental principles and threats to independence. This section

sets out specific requirements and application material relevant to applying

the conceptual framework in such circumstances.


General

R950.3 Before a firm accepts an engagement to provide a non-assurance service to

an assurance client, the firm shall determine whether providing such a

service might create a threat to independence.

950.3 A1 The requirements and application material in this section assist firms in

analyzing certain types of non-assurance services and the related threats that

might be created when a firm accepts or provides non- assurance services to

an assurance client.

950.3 A2 New business practices, the evolution of financial markets and changes in

information technology are among the developments that make it impossible

to draw up an all-inclusive list of non-assurance services that might be

provided to an assurance client. As a result, the Code does not include an

exhaustive listing of all non-assurance services that might be provided to an

assurance client.

Evaluating Threats


providing a non-assurance service to an assurance client include:

The nature, scope and purpose of the service.

The degree of reliance that will be placed on the outcome of the

service as part of the assurance engagement.




provided.

Whether the outcome of the service will affect matters reflected in

the subject matter or subject matter information of the assurance

engagement, and, if so:

○ The extent to which the outcome of the service will have a

material or significant effect on the subject matter of the


○ The extent of the assurance client’s involvement in determining

significant matters of judgment.

The level of expertise of the client’s management and employees

with respect to the type of service provided.

Materiality in Relation to an Assurance Client’s Information

950.4 A2 The concept of materiality in relation to an assurance client’s information is

addressed in International Standard on Assurance Engagements (ISAE)

3000 (Revised), Assurance Engagements other than Audits or Reviews of

Historical Financial Information. The determination of materiality involves

the exercise of professional judgment and is impacted by both quantitative

and qualitative factors. It is also affected by perceptions of the financial or

other information needs of users.

Multiple Non-assurance Services Provided to the Same Assurance Client

950.4 A3 A firm might provide multiple non-assurance services to an assurance client.

In these circumstances the combined effect of threats created by providing

those services is relevant to the firm’s evaluation of threats.

Addressing Threats

950.5 A1 Paragraph 120.10 A2 includes a description of safeguards. In relation to

providing non-assurance services to assurance clients, safeguards are

actions, individually or in combination, that the firm takes that effectively

reduce threats to independence to an acceptable level. In some situations,

when a threat is created by providing a service to an assurance client,

safeguards might not be available. In such situations, the application of the

conceptual framework set out in Section 120 requires the firm to decline or

end the non-assurance service or the assurance engagement.



Prohibition on Assuming Management Responsibilities

R950.6 A firm shall not assume a management responsibility related to the subject

matter or subject matter information of an assurance engagement provided

by the firm. If the firm assumes a management responsibility as part of any

other service provided to the assurance client, the firm shall ensure that the

responsibility is not related to the subject matter or subject matter

information of the assurance engagement provided by the firm.

950.6 A1 Management responsibilities involve controlling, leading and directing an

entity, including making decisions regarding the acquisition, deployment

and control of human, financial, technological, physical and intangible

resources.

950.6 A2 Providing a non-assurance service to an assurance client creates self-review

and self-interest threats if the firm assumes a management responsibility

when performing the service. In relation to providing a service related to the

subject matter or subject matter information of an assurance engagement

provided by the firm, assuming a management responsibility also creates a

familiarity threat and might create an advocacy threat because the firm

becomes too closely aligned with the views and interests of management.

950.6 A3 Determining whether an activity is a management responsibility depends on

the circumstances and requires the exercise of professional judgment.

Examples of activities that would be considered a management

responsibility include:

Setting policies and strategic direction.

Hiring or dismissing employees.

Directing and taking responsibility for the actions of employees in

relation to the employees’ work for the entity.

Authorizing transactions.

Controlling or managing bank accounts or investments.

Deciding which recommendations of the firm or other third parties

to implement.

Reporting to those charged with governance on behalf of

management.

Taking responsibility for designing, implementing, monitoring and

maintaining internal control.



950.6 A4 Providing advice and recommendations to assist the management of an

assurance client in discharging its responsibilities is not assuming a

management responsibility. (Ref: Paras. R950.6 to 950.6 A3).

R950.7 To avoid assuming a management responsibility when providing non-

assurance services to an assurance client that are related to the subject matter

or subject matter information of the assurance engagement, the firm shall be

satisfied that client management makes all related judgments and decisions

that are the proper responsibility of management. This includes ensuring that

the client’s management:

(a) Designates an individual who possesses suitable skill, knowledge

and experience to be responsible at all times for the client’s decisions

and to oversee the services. Such an individual, preferably within

senior management, would understand:

(i) The objectives, nature and results of the services; and

(ii) The respective client and firm responsibilities.

However, the individual is not required to possess the expertise to

perform or re-perform the services.

(b) Provides oversight of the services and evaluates the adequacy of the

results of the service performed for the client’s purpose; and

(c) Accepts responsibility for the actions, if any, to be taken arising from

the results of the services.

Other Considerations Related to Providing Specific Non-Assurance Services

950.8 A1 A self-review threat might be created if the firm is involved in the

preparation of subject matter information which is subsequently the subject

matter information of an assurance engagement. Examples of non-assurance

services that might create such self-review threats when providing services

related to the subject matter information of an assurance engagement

include:

(a) Developing and preparing prospective information and subsequently

providing assurance on this information.

(b) Performing a valuation that forms part of the subject matter

information of an assurance engagement.



SECTION 990

REPORTS THAT INCLUDE A RESTRICTION ON USE AND DISTRIBUTION

(ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW

ENGAGEMENTS)

Introduction




990.2 This section sets out certain modifications to Part 4B which are permitted in

certain circumstances involving assurance engagements where the report

includes a restriction on use and distribution. In this section, an engagement

to issue a restricted use and distribution assurance report in the

circumstances set out in paragraph R990.3 is referred to as an “eligible

assurance engagement.”


General

R990.3 When a firm intends to issue a report on an assurance engagement which

includes a restriction on use and distribution, the independence requirements

set out in Part 4B shall be eligible for the modifications that are permitted

by this section, but only if:

(a) The firm communicates with the intended users of the report

regarding the modified independence requirements that are to be

applied in providing the service; and

(b) The intended users of the report understand the purpose, subject

matter information and limitations of the report and explicitly agree

to the application of the modifications.

990.3 A1 The intended users of the report might obtain an understanding of the

purpose, subject matter information, and limitations of the report by

participating, either directly, or indirectly through a representative who has

authority to act for the intended users, in establishing the nature and scope

of the engagement. In either case, this participation helps the firm to

communicate with intended users about independence matters, including the

circumstances that are relevant to applying the conceptual framework. It also

allows the firm to obtain the agreement of the intended users to the modified

independence requirements.



R990.4 Where the intended users are a class of users who are not specifically

identifiable by name at the time the engagement terms are established, the

firm shall subsequently make such users aware of the modified

independence requirements agreed to by their representative.

990.4 A1 For example, where the intended users are a class of users such as lenders in

a syndicated loan arrangement, the firm might describe the modified

independence requirements in an engagement letter to the representative of

the lenders. The representative might then make the firm’s engagement letter

available to the members of the group of lenders to meet the requirement for

the firm to make such users aware of the modified independence

requirements agreed to by the representative.

R990.5 When the firm performs an eligible assurance engagement, any

modifications to Part 4B shall be limited to those modifications set out in

paragraphs R990.7 and R990.8.

R990.6 If the firm also issues an assurance report that does not include a restriction

on use and distribution for the same client, the firm shall apply Part 4B to

that assurance engagement.

Financial Interests, Loans and Guarantees, Close Business, Family and Personal

Relationships

R990.7 When the firm performs an eligible assurance engagement:

(a) The relevant provisions set out in Sections 910, 911, 920, 921, 922

and 924 need apply only to the members of the engagement team,

and their immediate and close family members;

(b) The firm shall identify, evaluate and address any threats to

independence created by interests and relationships, as set out in

Sections 910, 911, 920, 921, 922 and 924, between the assurance

client and the following assurance team members;

(i) Those who provide consultation regarding technical or industry

specific issues, transactions or events; and

(ii) Those who provide quality control for the engagement,


review; and

(c) The firm shall evaluate and address any threats that the engagement

team has reason to believe are created by interests and relationships

between the assurance client and others within the firm who can

directly influence the outcome of the assurance engagement, as set

out in Sections 910, 911, 920, 921, 922 and 924.



990.7 A1 Others within the firm who can directly influence the outcome of the

assurance engagement include those who recommend the compensation, or

who provide direct supervisory, management or other oversight, of the

assurance engagement partner in connection with the performance of the


R990.8 When the firm performs an eligible assurance engagement, the firm shall not

hold a material direct or a material indirect financial interest in the assurance

client.


Page 252 of 263 GLOSSARY

GLOSSARY, INCLUDING LISTS OF ABBREVIATIONS

In the Code of Ethics for Chartered Accountants, the singular shall be construed as

including the plural as well as the reverse, and the terms below have the following meanings

assigned to them.

In this Glossary, explanations of defined terms are shown in regular font; italics are used

for explanations of described terms which have a specific meaning in certain parts of the

Code or for additional explanations of defined terms. References are also provided to terms

described in the Code.

Acceptable

level

A level at which a chartered accountant using the reasonable and

informed third party test would likely conclude that the accountant

complies with the fundamental principles.

Advertising The communication to the public of information as to the services or

skills provided by chartered accountants in practice with a view to

procuring professional business.

Appropriate

reviewer

An appropriate reviewer is a professional with the necessary

knowledge, skills, experience and authority to review, in an objective

manner, the relevant work performed or service provided. Such an

individual might be a chartered accountant.

This term is described in paragraph 300.8A4.

Assurance

client

The responsible party that is the person (or persons) who:

(a) In a direct reporting engagement, is responsible for the subject

matter; or

(b) In an assertion-based engagement, is responsible for the subject

matter information and might be responsible for the subject

matter.

Assurance

engagement

An engagement in which a chartered accountant in practice expresses

a conclusion designed to enhance the degree of confidence of the

intended users other than the responsible party about the outcome of

the evaluation or measurement of a subject matter against criteria.

(For guidance on assurance engagements, see the International

Framework for Assurance Engagements issued by the International

Auditing and Assurance Standards Board. The International

Framework for Assurance Engagements describes the elements and

objectives of an assurance engagement and identifies engagements to

which International Standards on Auditing (ISAs), International

Standards on Review Engagements (ISREs) and International

Standards on Assurance Engagements (ISAEs) apply.)


GLOSSARY Page 253 of 263

Assurance

team

(a) All members of the engagement team for the assurance

engagement;

(b) All others within a firm who can directly influence the outcome

of the assurance engagement, including:

(i) Those who recommend the compensation of, or who provide

direct supervisory, management or other oversight of the

assurance engagement partner in connection with the

performance of the assurance engagement;

(ii) Those who provide consultation regarding technical or

industry specific issues, transactions or events for the

assurance engagement; and

(iii) Those who provide quality control for the assurance

engagement, including those who perform the engagement

quality control review for the assurance engagement.

Audit In Part 4A, the term “audit” applies equally to “review.”

Audit client

An entity in respect of which a firm conducts an audit engagement.

When the client is a listed entity, audit client will always include its

related entities. When the audit client is not a listed entity, audit client

includes those related entities over which the client has direct or

indirect control. (See also paragraph R400.20.)

In Part 4A, the term “audit client” applies equally to “review client.”

Audit

engagement

A reasonable assurance engagement in which a chartered accountant

in practice expresses an opinion whether financial statements are

prepared, in all material respects (or give a true and fair view or are

presented fairly, in all material respects), in accordance with an

applicable financial reporting framework, such as an engagement

conducted in accordance with International Standards on Auditing.

This includes a Statutory Audit, which is an audit required by

legislation or other regulation.

In Part 4A, the term “audit engagement” applies equally to “review

engagement.”

Audit report

In Part 4A, the term “audit report” applies equally to “review report.”

Audit team (a) All members of the engagement team for the audit engagement;


of the audit engagement, including:



(i) Those who recommend the compensation of, or who provide


engagement partner in connection with the performance of

the audit engagement, including those at all successively

senior levels above the engagement partner through to the

individual who is the firm’s Senior or Managing Partner

(Chief Executive or equivalent);

(ii) Those who provide consultation regarding technical or

industry-specific issues, transactions or events for the

engagement; and

(iii) Those who provide quality control for the engagement,


review for the engagement; and

All those within a network firm who can directly influence the

outcome of the audit engagement.

In Part 4A, the term “audit team” applies equally to “review team.”

Chartered

accountant

“Chartered accountant” means a person who is a member of the

Institute.

In Part 1, the term “chartered accountant” refers to individual chartered

accountants in business and to chartered accountants in practice and

their firms.

In Part 2, the term “chartered accountant” refers to chartered

accountants in business.

In Parts 3, 4A and 4B, the term “chartered accountant” refers to

chartered accountants in practice and their firms.

Chartered

accountant in

business

A chartered accountant working in areas such as commerce, industry,

service, the public sector, education, the not-for-profit sector, or in

regulatory or professional bodies, who might be an employee,

contractor, partner, director (executive or non-executive), owner-

manager or volunteer.

Chartered

accountant in

practice

As defined in the Chartered Accountants Ordinance, 1961.

The term “chartered accountant in practice” is also used to refer to a

firm of chartered accountants in practice.

Close family A parent, child or sibling who is not an immediate family member.



Code of

Corporate

Governance

As embodied in the Listing Regulations of the Pakistan Stock

Exchange.

Company Any entity or person(s), whether organized for profit or not, including

a parent company and all of its subsidiaries.

Conceptual

framework

This term is described in Section 120.

Contingent fee A fee calculated on a predetermined basis relating to the outcome of a

transaction or the result of the services performed by the firm. A fee

that is established by a court or other public authority is not a

contingent fee.

Cooling-off

period

This term is described in paragraph R540.5 for the purposes of

paragraphs R540.11 to R540.19.

Direct

financial

interest

A financial interest:

(a) Owned directly by and under the control of an individual or entity

(including those managed on a discretionary basis by others); or

(b) Beneficially owned through a collective investment vehicle,

estate, trust or other intermediary over which the individual or

entity has control, or the ability to influence investment decisions.

Director or

officer

Those charged with the governance of an entity, or acting in an

equivalent capacity, regardless of their title, which might vary from

jurisdiction to jurisdiction.

Eligible audit

engagement

This term is described in paragraph 800.2 for the purposes of Section

800.

Eligible

assurance

engagement

This term is described in paragraph 990.2 for the purposes of Section

990.

Engagement

partner

The partner or other person in the firm who is responsible for the

engagement and its performance, and for the report that is issued on

behalf of the firm, and who, where required, has the appropriate

authority from a professional, legal or regulatory body.

Engagement

period (Audit

and Review

Engagements)

The engagement period starts when the audit team begins to perform

the audit. The engagement period ends when the audit report is issued.

When the engagement is of a recurring nature, it ends at the later of

the notification by either party that the professional relationship has

ended or the issuance of the final audit report.



Engagement

period

(Assurance

Engagements

Other than

Audit and

Review

Engagements)

The engagement period starts when the assurance team begins to

perform assurance services with respect to the particular engagement.

The engagement period ends when the assurance report is issued.

When the engagement is of a recurring nature, it ends at the later of

the notification by either party that the professional relationship has

ended or the issuance of the final assurance report.

Engagement

quality control

review

A process designed to provide an objective evaluation, on or before

the report is issued, of the significant judgments the engagement team

made and the conclusions it reached in formulating the report.

Engagement

team

All partners and staff performing the engagement, and any individuals

engaged by the firm or a network firm who perform assurance

procedures on the engagement. This excludes external experts engaged

by the firm or by a network firm.

The term “engagement team” also excludes individuals within the

client’s internal audit function who provide direct assistance on an

audit engagement when the external auditor complies with the

requirements of ISA 610 (Revised 2013), Using the Work of Internal

Auditors.

Existing

accountant

A chartered accountant in practice currently holding an audit

appointment or carrying out accounting, tax, consulting or similar

professional services for a client.

External

expert

An individual (who is not a partner or a member of the professional

staff, including temporary staff, of the firm or a network firm) or

organization possessing skills, knowledge and experience in a field

other than accounting or auditing, whose work in that field is used to

assist the chartered accountant in obtaining sufficient appropriate

evidence.

Financial

interest

An interest in an equity or other security, debenture, loan or other debt

instrument of an entity, including rights and obligations to acquire

such an interest and derivatives directly related to such interest.

Financial

statements

A structured representation of historical financial information,

including related notes, intended to communicate an entity’s economic

resources or obligations at a point in time or the changes therein for a

period of time in accordance with a financial reporting framework. The

related notes ordinarily comprise a summary of significant accounting

policies and other explanatory information. The term can relate to a

complete set of financial statements, but it can also refer to a single

financial statement, for example, a balance sheet, or a statement of

revenues and expenses, and related explanatory notes.



Financial

statements on

which the firm

will express an

opinion

In the case of a single entity, the financial statements of that entity. In

the case of consolidated financial statements, also referred to as group

financial statements, the consolidated financial statements.

Firm

(a) A sole practitioner, partnership or corporation of chartered

accountants;

(b) An entity that controls such parties, through ownership,

management or other means; and

(c) An entity controlled by such parties, through ownership,

management or other means.

Paragraphs 400.4 and 900.3 explain how the word “firm” is used to

address the responsibility of chartered accountants and firms for

compliance with Parts 4A and 4B, respectively.

Fundamental

principles

This term is described in paragraph 110.1 A1. Each of the fundamental

principles is, in turn, described in the following paragraphs:

Integrity R111.1

Objectivity R112.1

Professional competence and due care R113.1

Confidentiality R114.1

Professional behavior R115.1

Historical

financial

information

Information expressed in financial terms in relation to a particular

entity, derived primarily from that entity’s accounting system, about

economic events occurring in past time periods or about economic

conditions or circumstances at points in time in the past.

Immediate

family

A spouse (or equivalent) or dependent.

Independence

Independence comprises:

(a) Independence of mind – the state of mind that permits the

expression of a conclusion without being affected by influences

that compromise professional judgment, thereby allowing an

individual to act with integrity, and exercise objectivity and

professional skepticism.


circumstances that are so significant that a reasonable and

informed third party would be likely to conclude that a firm’s, or



an audit or assurance team member’s, integrity, objectivity or

professional skepticism has been compromised.

As set out in paragraphs 400.5 and 900.4, references to an individual

or firm being “independent” mean that the individual or firm has

complied with Parts 4A and 4B, as applicable.

Indirect

financial

interest

A financial interest beneficially owned through a collective investment

vehicle, estate, trust or other intermediary over which the individual or

entity has no control or ability to influence investment decisions.

Inducement An object, situation, or action that is used as a means to influence

another individual’s behavior, but not necessarily with the intent to

improperly influence that individual’s behavior.

Inducements can range from minor acts of hospitality between

business colleagues (for chartered accountants in business), or

between chartered accountants and existing or prospective clients (for

chartered accountants in practice), to acts that result in non-

compliance with laws and regulations. An inducement can take many

different forms, for example:

Gifts.

Hospitality.

Entertainment.





Key audit

partner

The engagement partner, the individual responsible for the

engagement quality control review, and other audit partners, if any, on

the engagement team who make key decisions or judgments on

significant matters with respect to the audit of the financial statements

on which the firm will express an opinion. Depending upon the

circumstances and the role of the individuals on the audit, “other audit

partners” might include, for example, audit partners responsible for

significant subsidiaries or divisions.

Listed entity An entity whose shares, stock or debt are quoted or listed on a

recognized stock exchange, or are marketed under the regulations of a

recognized stock exchange or other equivalent body.

May This term is used in the Code to denote permission to take a particular

action in certain circumstances, including as an exception to a

requirement. It is not used to denote possibility.



Might This term is used in the Code to denote the possibility of a matter

arising, an event occurring or a course of action being taken. The term

does not ascribe any particular level of possibility or likelihood when

used in conjunction with a threat, as the evaluation of the level of a

threat depends on the facts and circumstances of any particular

matter, event or course of action.

Network A larger structure:

(a) That is aimed at co-operation; and

(b) That is clearly aimed at profit or cost sharing or shares common

ownership, control or management, common quality control

policies and procedures, common business strategy, the use of a

common brand-name, or a significant part of professional

resources.

Network firm A firm or entity that belongs to a network.

For further information, see paragraphs 400.50 A1 to 400.54 A1.

Non-

compliance

with laws and

regulations

(Chartered

Accountants in

Business)

Non-compliance with laws and regulations (“non-compliance”)

comprises acts of omission or commission, intentional or

unintentional, which are contrary to the prevailing laws or regulations

committed by the following parties:

(a) The chartered accountant’s employing organization;

(b) Those charged with governance of the employing organization;

(c) Management of the employing organization; or



This term is described in paragraph 260.5 A1.

Non-

compliance

with laws and

regulations

(Chartered

Accountants in

Practice)

Non-compliance with laws and regulations (“non-compliance”)

comprises acts of omission or commission, intentional or

unintentional, which are contrary to the prevailing laws or regulations

committed by the following parties:

(a) A client;

(b) Those charged with governance of a client;

(c) Management of a client; or

(d) Other individuals working for or under the direction of a client.


Office A distinct sub-group, whether organized on geographical or practice

lines.



Predecessor

accountant

A chartered accountant in practice who most recently held an audit

appointment or carried out accounting, tax, consulting or similar

professional services for a client, where there is no existing accountant.

Professional

activity

An activity requiring accountancy or related skills undertaken by a

chartered accountant, including accounting, auditing, tax,

management consulting, and financial management.

Professional

services

Professional activities performed for clients.

Proposed

accountant

A chartered accountant in practice who is considering accepting an

audit appointment or an engagement to perform accounting, tax,

consulting or similar professional services for a prospective client (or

in some cases, an existing client).

Public interest

entity

(a) (a) A listed entity; or

(b) (b) An entity:

(i) Defined by regulation or legislation as a public interest

entity; or

(ii) For which the audit is required by regulation or legislation

to be conducted in compliance with the same independence

requirements that apply to the audit of listed entities. Such

regulation might be promulgated by any relevant regulator,

including an audit regulator.

Other entities might also be considered to be public interest entities,

as set out in paragraph 400.8.

Publicity The communication to the public of facts about a chartered accountant

which are not designed for the deliberate promotion of that chartered

accountant.

Reasonable

and informed

third party

Reasonable

and informed

third party test

The reasonable and informed third party test is a consideration by the

chartered accountant about whether the same conclusions would likely

be reached by another party. Such consideration is made from the

perspective of a reasonable and informed third party, who weighs all

the relevant facts and circumstances that the accountant knows, or

could reasonably be expected to know, at the time that the conclusions

are made. The reasonable and informed third party does not need to

be an accountant, but would possess the relevant knowledge and

experience to understand and evaluate the appropriateness of the

accountant’s conclusions in an impartial manner.

These terms are described in paragraph R120.5 A4.



Related entity An entity that has any of the following relationships with the client:

(a) An entity that has direct or indirect control over the client if the

client is material to such entity;

(b) An entity with a direct financial interest in the client if that entity

has significant influence over the client and the interest in the

client is material to such entity;

(c) An entity over which the client has direct or indirect control;

(d) An entity in which the client, or an entity related to the client under

(c) above, has a direct financial interest that gives it significant

influence over such entity and the interest is material to the client

and its related entity in (c); and

(e) An entity which is under common control with the client (a “sister

entity”) if the sister entity and the client are both material to the

entity that controls both the client and sister entity.

Review client An entity in respect of which a firm conducts a review engagement.

Review

engagement

An assurance engagement, conducted in accordance with

International Standards on Review Engagements or equivalent, in

which a chartered accountant in practice expresses a conclusion on

whether, on the basis of the procedures which do not provide all the

evidence that would be required in an audit, anything has come to the

accountant’s attention that causes the accountant to believe that the

financial statements are not prepared, in all material respects, in

accordance with an applicable financial reporting framework.

Review team (a) All members of the engagement team for the review engagement;

and


of the review engagement, including:

i) Those who recommend the compensation of, or who provide


engagement partner in connection with the performance of

the review engagement, including those at all successively

senior levels above the engagement partner through to the

individual who is the firm’s Senior or Managing Partner

(Chief Executive or equivalent);

ii) Those who provide consultation regarding technical or

industry specific issues, transactions or events for the

engagement; and



iii) Those who provide quality control for the engagement,


review for the engagement; and

All those within a network firm who can directly influence the

outcome of the review engagement.

Safeguards Safeguards are actions, individually or in combination, that the

chartered accountant takes that effectively reduce threats to

compliance with the fundamental principles to an acceptable level.


Senior

chartered

accountant in

business

Senior chartered accountants in business are directors, officers or

senior employees able to exert significant influence, over, and make

decisions regarding, the acquisition, deployment and control of the

employing organization’s human, financial, technological, physical

and intangible resources.


Substantial

harm

This term is described in paragraphs 260.5 A3 and 360.5 A3.

Special

purpose

financial

statements

Financial statements prepared in accordance with a financial reporting

framework designed to meet the financial information needs of

specified users.

Those charged

with

governance

The person(s) or organization(s) (for example, a corporate trustee)

with responsibility for overseeing the strategic direction of the entity

and obligations related to the accountability of the entity. This includes

overseeing the financial reporting process. For some entities in some

jurisdictions, those charged with governance might include

management personnel, for example, executive members of a

governance board of a private or public sector entity, or an owner-

manager.

Threats This term is described in paragraph 120.6 A3 and includes the

following categories:

Self interest 120.6 A3(a)

Self-review 120.6 A3(b)

Advocacy 120.6 A3(c)

Familiarity 120.6 A3(d)

Intimidation 120.6 A3(e)

Time-on period This term is described in paragraph R540.5.



LISTS OF ABBREVIATIONS AND STANDARDS REFERRED TO IN

THE CODE

LIST OF ABBREVIATIONS

Abbreviation Explanation

Assurance Framework International Framework for Assurance Engagements

COSO Committee of Sponsoring Organizations of the Treadway

Commission

CoCo Chartered Professional Accountants of Canada Criteria of

Control

IAASB International Auditing and Assurance Standards Board

IESBA International Ethics Standards Board for Accountants

IFAC International Federation of Accountants

ISAs International Standards on Auditing

ISAEs International Standards on Assurance Engagements

ISQCs International Standards on Quality Control

ISREs International Standards on Review Engagements

LIST OF STANDARDS REFERRED TO IN THE CODE

Standard Full Title

ISA 320 Materiality In Planning and Performing an Audit

ISA 610 (Revised

2013)

Using the Work of Internal Auditors

ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of

Historical Financial Information

ISQC 1 Quality Control for Firms that Perform Audits and Reviews of

Financial Statements, and Other Assurance and Related

Services Engagements

ISRE 2400 (Revised) Engagements to Review Historical Financial Statements

EFFECTIVE DATE

The Code is effective for audits of financial statements for periods beginning on or after

July 1, 2020.

MEMBERS' HANDBOOK

PART IV

7. MEMBER’S CONDUCT-GENERALLY


7.0 Members’ Conduct Generally

CONTENTS

7.01 Use of designations and designatory letters

7.02 Communicate change in address promptly

7.03 Compulsory admission as fellow members (Withdrawn)

7.04 Members permitted to mark Tick or Cross in Election Ballot Papers

7.05 ICAP Code of conduct policy for general membership usage of social media

7.01

USE OF DESIGNATIONS AND DESIGNATORY LETTERS

"It was decided that there should be no objection to use any qualification and designatory letters against the names of members provided these denoted the

qualifications of Universities and Institutes duly recognized by the *Central Government or the Council of the Institute. The members were, however, advised to use only highest degree in a particular time awarded by a University or an Institute".

(1st meeting of Council - August 17, 1961)

Only designation 'Chartered Accountants' to be used, “in accordance with Section 5 of the Ordinance, members of the Institute could put the words 'ACA' or 'FCA' against their names. Section 7 of the Ordinance, however, provided that every member of the Institute in practice shall and any other member may use the designation of 'CHARTERED ACCOUNTANT' and no member using such designation shall use any other designation, whether in addition thereto or in substitution therefore, except as laid down in the proviso to that section by which any such person was not prohibited from adding any other description or designatory letters to his name, if entitled thereto the indicate membership of such other Institute of Accountancy, whether in Pakistan or elsewhere, as may be recognized in this behalf by the Council, or any other qualification that he may possess. There is also nothing to prohibit a firm, all the partners of which are members of the Institute and in practice, from being known by its firm name as Chartered Accountants. Cases were brought to the notice of the Council where members of firms of Chartered Accountants were styling themselves as Chartered Accountants (England & Wales) and Chartered Accountants, (Pakistan). The use of the words 'CHARTERED ACCOUNTANTS'(ENGLAND & WALES) with the name of a firm was not considered desirable. The Council resolved that a general directive may be issued to members that:

* Now Federal Government

7.01

(a) a firm practicing in Pakistan may use the designation 'CHARTERED ACCOUNTANTS' but without any explanatory words or letters.

(b) A member may add after his own name any description or designatory letters to which he is entitled provided that his Pakistani professional qualification shall appear first without any explanatory word.

The Council reconsidered the question of allowing the use of designatory letters against members' names and decided to issue the following revised directive to the members:-

(a) only the designation 'Chartered Accountants' should be used against the name of practicing firm in Pakistan. No explanatory words or letters should be used after this designation.

(b) a member may add after this own name any description or designatory letter to which he is entitled provided that his Pakistani qualifications shall appear first 'without any explanatory words.

(c) Where a partner signs in his individual name on behalf of a firm

there would be no objection to his adding recognized foreign qualifications or designatory letters to his personal name (not the name of the firm) but such qualifications or designatory letters may be added after Pakistani qualifications which will appear first without the use of the word "Pakistan".

(4th meeting of Council August 25, 1962. Re-affirmed in 7th meeting - August 30, 1963)

''The Council approved the qualification of the following organizations for the purpose of Section 7 of the Chartered Accountants Ordinance, 1961 (X of 1961):

7.01

(i) The Institute of Chartered Accountants in England & Wales;

(ii) The Institute of Chartered Accountants in Ireland;

(iii) The Institute of Chartered Accountants in Scotland;

(iv) The Institute of Chartered Accountants in Australia; and

(v) The Canadian Institute of Chartered Accountants.

This means that only the qualifications of the above accountancy bodies can be used against the names of the members in the manner as specified on preceding page.

(7th meeting of Council - August 30, 1963)

Use of designatory letters ACMA, ACIS (UK), ACCA: "The Council allowed the members to use designatory letters of their professional qualifications like ACMA, ACIS (UK),' ACCA with their names."

(64th meeting of Council - December 24, 1981)

7.02

COMMUNICATE CHANGE IN ADDRESS PROMPTLY

"Recently, there have been growing complaints about postal mishap and mis-communication of Institute's circulars and notifications to members. In order to serve better the members' interest by making available promptly all communications dispatched from the Institute, the Secretariat will appreciate if the members would keep the Institute informed in writing about any change in addresses. Attention of the members is also invited to Bye-Law 7 of Chartered Accountants Bye-Laws, 1961 which requires the members to inform the Institute of any change of address of place or places of business or employment".

(Newsletter - December 1981)

7.04

Members permitted to mark 'Tick' or 'Cross' on election ballot papers

"The Election Committee appointed for Council's election held in January 1985 had recommended that for future elections both 'CROSS’ and 'TICK' marks on the Ballot papers should be acceptable against the existing 'CROSS' marks only. The Council accepted the suggestion".

(75th meeting of the Council - February 12, 1985)

Directive 7.05

ICAP CODE OF CONDUCT POLICY FOR GENERAL MEMBERSHIP USAGE OF SOCIAL MEDIA

Communication is an important aspect of our personal and professional lives. Technology has given a different dimension to this aspect today. Advent of social media has minimised the distinction among personal, social and professional communication.

As a result, sometimes we face situations that create confusions and due to inappropriate communications, sometimes ethical and legal problems are created, that are contrary to the expectations of the society from the members of a profession known for its high ethical and professional standards. To uphold the high ethical conduct of the members of the Institute that serve public interest and to maintain the reputation of the Institute and the profession, it is considered appropriate to form a policy for the conduct of members of the Institute in this regard.

Therefore, this directive is being issued to ensure decency in communication, confidentiality and prevent infringement of intellectual property of the Institute in relation to the activities carried out by the members on social media forums such as Facebook, WhatsApp, etc.

1) Communication in good taste

While posting messages on social media, members have to keep the boundaries of decent and respectful communication. The basic principle of respecting the core value of the profession is not to be compromised.

2) Use of ICAP logo on Social Media

2.1 Groups and pages are being made on Facebook, WhatsApp and social media platforms which display ICAP’s logos, name and distinctive initials giving the impression that they originate from or are approved by the Institute.

2.2 Members are advised to respect the Institute’s intellectual property rights by ensuring that the pages and groups do not use the ICAP logos or create the impression of being affiliated or appear to be like an official page / group of the Institute.

3) Confidentiality

Disclosure of any proceedings of the Council or its Committees/Boards or any official working papers, minutes of meetings, and documents on social media forums which are relating to the affairs of the Institute and are confidential and not publicly available is strictly prohibited.

4.) Be Respectful

All the Members are advised not to post false or defamatory material on ICAP or any of its Committees, Boards and Council, such as personal attacks, derogatory and disparaging remarks, statements or content that is threatening.

Members are advised to comply with the above requirements while exchanging correspondence and posting messages at social media forums. In case of violation of any of the provisions contained herein, cognizance of the same may be taken for necessary disciplinary action by the Institute under the Code of Ethics for Chartered Accountants and the Chartered Accountants Ordinance, 1961.

(311th meeting of the Council – March 21-22, 2019)

MEMBERS' HANDBOOK

PART IV

8. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)


Directive 8.01 (Revised)

8. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)

CONTENTS

8.01 Continuing Professional Development (CPD) Revised

8.02 Compulsory Attendance of Practicing Members in Seminars on International Accounting Standards, International Standards on Auditing and Quality Control


CONTINUING PROFESSIONAL DEVELOPMENT (CPD) 1

CONTINUING PROFESSIONAL DEVELOPMENT

Preamble

1. The International Federation of Accountants (IFAC) has made it mandatory for its member bodies to design and implement a Continuing Professional Development (CPD) mechanism in such a way that it becomes a component of continued membership for the professional accountants. In order to facilitate the CPD implementation, IFAC has issued International Educational Standard for Professional Accountants (IES-7) which is in effect from January 01, 2014.

2. CPD provides continuing development of the (a) professional knowledge (b)

professional skills (c) professional values, ethics and attitudes, and (d) competence achieved during Initial Professional Development (IPD), refined appropriately for the professional activities and responsibilities of the professional accountant.

3. In addition to education, practical experience and training, CPD also includes learning

and development activities, such as (a) coaching and mentoring (b) networking (c) observation, feedback and reflection and (d) the self-directed and unstructured gaining of knowledge.

4. The objective of this directive is to have chartered accountants develop and maintain

their competence subsequent to IPD through the undertaking of CPD that is necessary, in the public interest, to provide high quality services to meet the needs of clients, employers and other stakeholders.

5. This directive prescribes that members to: a. demonstrate a commitment to CPD and maintain professional competence; and b. undertake CPD to contribute to the development and maintenance of professional

competence that is appropriate to their work and professional responsibilities.

6. Effective date:

This directive is effective from January 1, 2015.

CPD Approach

7. The IES-7 states that CPD can be achieved by at least three different approaches: a. Input based approach – by establishing a set amount of learning activity that is

considered appropriate to develop and maintain competence. b. Output based approach – by requiring professional accountants to demonstrate,

by way of outcomes, that they develop and maintain professional competence. c. Combination approach – by effectively and efficiently combining elements of the

input and output based approaches, setting the amount of learning activity required and measuring the outcomes achieved.

8. The Institute has adopted a combination approach before moving towards a comprehensive output based system.

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Organization

9. The CPD Committee of the Institute has the responsibility for the establishment of directive and overall coordination of CPD activities for its members in Pakistan and abroad.

10. Regional Committees would coordinate with the CPD Committee in execution of CPD activities.

Requirement

11. Every member is required to: a. complete at least 120 hours or equivalent learning units of relevant professional

development activity in each rolling three year period, of which 60 hours or equivalent learning units should be verifiable;

b. complete at least 20 hours or equivalent learning units in each year; and c. track and measure learning activities to meet the above requirements.

Explanation: “Rolling Periods” under this directive are periods of three year each, of which first commences from July 1, 2012:

• For those who are members as on July 1, 2012 the first rolling period starts on July

1, 2012 and completes on June 30, 2015.

• On July 1, 2012 the 1short fall in the CPD account maintained at the Institute shall

be deemed zero.

• The excess hours as at June 30, 2012 shall be carried forward to the rolling period

commencing on July 1, 2012.2

• For all other members, proportionate rolling period will commence on first day of

the month following the date of admission of a member and will complete on its

scheduled date explained in this paragraph. The CPD requirement will be prorated

on the basis of 120 hours for three year period.

• The excess of CPD hours of one year may be carried forward to the next year within

a rolling period only. At the end of a rolling period the excess hours shall be

nullified, however, the members will be required to complete their shortfall hours

to avoid any sanctions, as prescribed by the Council.

1 The words “excess or” were deleted by the Council in its 234th meeting held on June 15 & 16, 2012. 2 Paragraph (c) under the head “Rolling Period” inserted by the Council in its 234th meeting held on June 15 & 16, 2012.

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Measurement of CPD Credit Hours

12. The CPD credit hours are to be measured as follows:

S. # Activity Evidence to be kept CPD Credit Hours

a. Participation in short courses, seminars, conferences, lectures* and trainings

*Excluding classes of degree courses1

Certificates of attendance/course contents in case it is a non-ICAP course

Actual classroom time. For a full day session a credit of 8 hours and for a half-day session 4 hours

b. Completing degree courses and studying professional certifications

Degree/ Certification Professional Qualifications

Members bodies of IFAC, CISA,CIA

5 times of the examination hours or 40 hours, whichever is lower, in a CPD year1

Degree Courses

As accredited by the HEC approved or Foreign Institute/ University. On completion of a semester/ stage. 1/3 of actual contact hours.3 However, the maximum CPD hours that can be given under this head shall be 40 hours for a year

c. Relevant research paper/article (at least 4000 words) published in a peer reviewed journal including ICAP’s publication

Original copy of the journal/ publication

8 hours

Should not exceed more than 24 hours per annum

d. Contributing article/review or any other relevant material including material in ICAP’s, or other, local or international publications

Original copy of the publication or e-copy of publications 1

4 hours

Should not exceed maximum of 8 hours per year

e. Registered and evidence-based E-learning courses

Certification Actual time consumed by the course / training

f. Presenter, participant or session chairman in short courses, seminars, conferences, trainings and media including interviews in print media

To be declared on the Reporting Form

Twice the actual time of the presentation

1 Amendments approved by the Council in its 269th Meeting held on October 14 2015

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g. Teaching relevant professional or degree courses


One and half the actual time of the session1.

h. Participation in council, committees, working groups of ICAP other regulatory bodies, participation as Non-Executive Director in Board and Board Committee of listed companies.2


Actual time of the meeting

i. Writing of books on professional interest, technical and reference manuals including study pack

Copy of the publication 1 hour per page of technical content. Maximum 40 hours per release

j.

Watching videos/CDs of the ICAP CPD programmes of the Institute by a particular geographical area(s) where there is no CPD Committee of the Institute. However, CPD hours in respect of the above activity are restricted to a maximum of 20 hours in a year. Further, places where there are established CPD Committees, CPD hours in respect of the above activity are restricted to a maximum of 10 hours in a year

Members are encouraged to obtain prior approval from the CPD Committee

Attendance/topic(s) to be communicated to the CPD Committee within 2 weeks of watching such programme

Half of the actual duration

k. General / Self certified readings (relevant to current or future

development needs) e.g. journal articles, newspaper, reports, subscriptions etc.

Details to be provided on CPD Reporting Form:

Printed Material

Date of reading

Date of publication

Title of the publication

Title of the specific article

Web-based Material

in addition to above information also include:

Retrieved/accessed from the full web address.

Date/time of retrieval/access

Actual reading time, subject to maximum of 2 hours per article subject to the maximum of 10 hours per annum

1 The words ‘subject to maximum of 20 hours per annum’ were deleted by the Council in its 269th Meeting held on October 14 2015. 2 Amendments approved by the Council in its 269th Meeting held on October 14 2015

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l Visit to ICAP libraries

The Librarian will provide sign in and out time to the CPD Directorate.

Actual time spent in the library

m On Job learning1

Assignments and new initiatives that provide new learning for professionals while on job

Confirmation of employer and details of learning outcomes.

Half of actual hours spent on the assignments and initiatives subject to maximum of 60 credit hours in three year rolling period

13. Exemption to CPD

This directive does not apply to the members who fall in following categories: a. ill or incapacitated so that he/she cannot perform normal work; b. retired from whole time business; c. career breaks; d. members holding public offices such as Federal Ministers, Provincial Ministers,

Advisors to Ministers, Senators, MNAs, MPAs etc., during the currency of their offices; or

e. for any other reason which is considered justifiable by the CPD Committee, for the reasons duly recorded.

Verification

A “Verifiable CPD Activity” undertaken by the member must be supported by documentary evidences required to be maintained by the member provided under paragraph 12(a) to 12(j) and 12(l) for one year after the close of rolling period. A” Non-verifiable CPD Activity” is an activity where a member is unable to prove that the CPD learning activity has taken place. Ordinarily, non-verifiable CPD does not have a defined learning outcome and is not designed to address a specific learning need. General reading, as defined in paragraph 12(k), is an example of non-verifiable CPD.

Non-compliance

14. On non-compliance with the CPD requirement at the end of each year and at the end of three year rolling period the members will sign a declaration form of non-compliance with a firm commitment to make up the deficit within 180 days.

On failure to comply with the requirements of this Directive, the CPD Committee will refer the non-compliant cases to the Council.

Recording and Monitoring

15. Each member is responsible for maintaining and retaining his CPD records and related evidences. A member may update member’s record maintained by the Institute online or he may keep the information through any other medium. The records maintained by the member should demonstrate that the member understands and complies with the

1 Amendments approved by the Council in its 269th Meeting held on October 14 2015

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Regulations. Additionally, CPD records are to be maintained by the CPD Directorate where CPD activities are organized by the Institute or any of its Regional or City – Sub-Committee:

i. The Regional or City CPD Sub-committee will maintain a register of attendance; and

ii. Within two weeks of holding the activity, will send the attendance sheet, to the CPD Directorate

a. The CPD Directorate will summarize the CPD record and send a summary to the CPD Committee for information.

b. The CPD Directorate will be responsible for maintaining record in respect of members participating in CPD activities arranged by Regional or City CPD sub-committees and relating to member’s participation in Institute’s Standing and other committees and uploading such CPD data on the website for members to review.

c. The CPD Directorate should also maintain up-to-date online data of all members of all CPD activities reported by member.

Annual Declaration

16. A member shall be required to submit annually to the Institute a declaration in a specified format by post or online, confirming member’s compliance with this Directive and, if requested by the Institute, provide such evidence of compliance as may be required.

17. The above said declaration or an evidence of its online filing shall be filed along with the

annual renewal fee of the membership.

(232nd meeting of the Council held on March 6, 2012) (234th meeting of the Council held on June 15 and 16, 2012) (256th meeting of the Council held on August 7-8 and 9, 2014) (269th meeting of the Council held on October 14, 2015)

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Annexure

Declaration:

I declare that I comply with the annual CPD requirements. I have completed a total of _________

hours for the last calendar year. I understand that it is my responsibility to maintain professional

competence and my record may be called in for review.

______________________ ______________________ ______________________

Name Signature Date (MM/DD/YY)

Member Name

Member Number

Reporting Year

Annual Continuing Professional Development (CPD) Declaration

Form

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________________________________ The Directive No. 8.01 before this revision reads as under:

Introduction 1. The International Federation of Accountants (IFAC) has made it mandatory for its member bodies to

design and implement a Continuing Professional Development (CPD) mechanism in such a way that it becomes a component of continued membership for the professional accountants. In order to facilitate the CPD implementation, IFAC has issued International Educational Standard for Professional Accountants (IES-7) which is in effect from January 01, 2006.

2. Continuing professional development refers to learning activities that develop and maintain

capabilities to enable professional accountants to perform competently within their professional environments.

3. It is to be appreciated that the knowledge needed to function effectively as a professional accountant

in public practice, industry, commerce, education and the public sector continues to expand and change at a rapid rate with the changes in regulatory environment, international standards and technology.

4. CPD, on its own, does not provide assurance that all members will provide high quality professional

service all the time. Doing so involves more than maintaining professional competence; it involves applying knowledge with professional judgment and an objective attitude. Also, there cannot be assurance that every person who participates in a CPD programme will obtain the full benefits of that programme, because of variances in individual commitment and capacity to learn. Nevertheless, it is certain that members who are not upto-date on current technical and general knowledge pertinent to their work will not be able to provide professional services competently. Therefore, despite the inherent limitations of any CPD programme, a CPD requirement is important in preserving the standard of the profession and also in maintaining public confidence.

5. It is the responsibility of the individual member to develop and maintain professional competence

necessary to provide high quality services to clients, employers and other stakeholders. Members are free to choose from the opportunities both locally and internationally available, as approved by the CPD Committee, to fulfill their relevant CPD needs.

6. This Directive prescribes that members:

a. foster a commitment to lifelong learning b. establish benchmarks for developing and maintaining the

professional competence necessary to protect the public interest; and c. monitor and enforce the continuing development and maintenance of

professional competence. Effective date: 7. This directive is effective from July 01, 2007.

CPD Approach 8. The IES-7 states that CPD can be achieved by at least three different approaches:

(a) In-put based approaches – by establishing a set amount of learning activity that is considered appropriate to develop and maintain competence.

(b) Out-put based approaches – by requiring professional accountants to demonstrate, by way of outcomes, that they develop and maintain professional competence.

(c) Combination approaches – by effectively and efficiently combining elements of the input and output based approaches, setting the amount of learning activity required and measuring the outcomes achieved.

9. The Institute has adopted a combination approach before moving towards a comprehensive output-based

system. Organization 10. The CPD Committee of the Institute has the responsibility for the establishment of directive and overall

coordination of CPD activities for its members in Pakistan & abroad. 11. Regional Committees would coordinate with the CPD Committee in constitution of the City CPD

Sub-Committees and execution of CPD activities. CPD Requirements 12. Every member is required to complete 40 hours in one year or 120 hours in every 3 years period with

a minimum of 20 hours in a year.

Measurement of CPD Credit Hours 13. The CPD credit hours are to be measured as follows:

S. No.

Activity Evidence to be attached

CPD Credit Hours

a Participation in short courses, seminars, conferences, lectures and trainings.

Copies of certificates of attendance/course contents in case it is a non-ICAP course.

Actual classroom time. For a full day session a credit of 8 hours and for a half-day session 4 hours.

b Completing degree courses and studying relevant professional certifications.

Copy of degree/certification

As accredited by the HEC approved Institute/ University. For example 3 credit hours course will be measured 3 hours long.

c Relevant research paper published in a peer reviewed journal

Original copy of the journal

8 hours

d Contributing article/review or any other relevant material including material in ICAP’s, or other, local or international publications

Original copy of the publication

4 hours

e Registered and evidence-based E-learning courses from recognized content providers.

Copy of the certification

Actual time consumed by the course/ training.

f Presenter or Session Chairman in short courses, seminars, conferences and trainings.


Twice the actual time of the presentation.

g Teaching relevant professional or degree courses


One and half the actual time of the session subject to maximum of 20 hours per annum.

h Participation in council, committees, working groups of ICAP and other regulatory bodies


Actual time of the meeting

i Writing of books on professional interest, technical and reference manuals including study pack

Copy of the publication

1 hour per page of technical content. Maximum 20 hours per release.

j Watching videos/CDs of the ICAP CPD programmes of the Institute by a particular geographical area(s) where there is no CPD Committee of the Institute. However, CPD hours in respect of the above activity are restricted to a maximum of 20 hours in a year. Further,

Members are encouraged to obtain prior approval from the CPD Committee. Attendance/topic(s) to be communicated to the CPD Committee within 2

Half of the actual duration

places where there are established CPD Committees, CPD hours in respect of the above activity are restricted to a maximum of 10 hours in a year

weeks of watching such programme.

13.1 As a result of comments received from various stakeholders, the Institute has instituted an interim arrangement with regards to the submission of self-certified readings which will count towards the required number of CPD hours. For the first three year reporting cycle, members are permitted to submit a maximum of 30 hours of self-certified readings over the three years, with a maximum of 10 hours in any one year. Self certified readings include, inter alia, relevant journal articles, newspaper reports and subscriptions.

In order to self-certify, a member must maintain a schedule of all such reading material, specifying the following:

date, title of the publication, the title of the specific article and the number of CPD hours in respect of the reading.

The schedule must be self-certified on an annual basis and retained as part of their CPD records. It is also recommended that the member make a copy of the relevant reading and certify that they have read it by signing it off and retaining it with the annual reading schedule. This interim arrangement will be reviewed at the end of the first three year cycle (2010). Exemption to CPD 14. This directive does not apply to the members who fall in following categories.

a) ill or incapacitated so that he/she cannot perform normal work.

b) retired from whole time business.

c) career breaks.

d) members holding public offices such as Federal Ministers, Provincial Ministers, Advisors to Ministers, Senators, MNAs, MPAs etc, during the currency of their offices.

Verification 15. The measurement of learning activities prescribed be verifiable by documentary support duly

concurred by the CPD Committee. Non-compliance 16. For all members, non-compliance of this Directive will be reviewed by the CPD Committee and if

deemed appropriate the matter may be referred to the Executive Committee.

Recording and Monitoring

17. CPD records are to be maintained by the CPD committee of the Institute as follows:

a) Where CPD activities are organized by the Institute / CPD Sub-committees

i. The CPD Sub-committee will maintain a register of attendance at Institute organized activities

ii. Within two weeks of holding the activity, the register details will be sent to the CPD Committee

b) Where a member participates in other CPD credit programmes

i. On an annual basis the member will complete a CPD declaration form

(annexure) summarizing the details of the CPD activities in which they participated based on the credit hours measurement prescribed in para 13

ii. The declaration should be sent to the attention of the CPD Committee.

iii. The above declaration along with supporting evidence must be received by the

CPD Committee annually by July 31

iv. The member will maintain evidence of the CPD activity e.g. attendance confirmation / copy of article published

v. The evidence of the CPD activity will be attached to the declaration form

The CPD Committee will summarize the declarations and send a summary to the CPD Directorate for updating of records

c) The CPD Directorate will be responsible for maintaining record in respect of

members participating in CPD activities and uploading latest CPD data on the website for member’s to review.

(190th Council meeting, held on July 26, 2007)

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN CPD REPORTING FORM

Name of Member:_____________________________

Membership Number: _____________

Reporting Year: ___________________

Date: _________________

____________________ Signature of member

Approved by: _____________________ CPD Director Date: ___/___/__

Serial No. Description of Programme attended

Date Organized by Credit Hours

8.02

.

COMPULSORY ATTENDANCE OF A PRACTISING MEMBER INSEMINARS ON INTERNATIONAL

ACCOUNTING STANDARDS, INTERNATIONAL STANDARDS ON AUDITING AND QUALITY CONTROL

On the recommendation of the Professional Standards & Technical Advisory Committee, the Council in its 127th meeting held on July 5, 1998, has decided to issue the following directive:- With immediate effect there would be compulsory attendance of at least one partner of practising firm or the sole proprietor himself or an employee member of such firms, as the case may be, in the seminars/workshops on International Accounting Standards, International Standards on Auditing and Quality Control arranged by the CPD Committees or Quality Control Review Committees of the Institute.

(127the meeting of the Council-July 5,1998)